KPIT Technologies share price tanks 10%: Time to buy the dip?

Shares of KPIT Technologies Ltd took a sharp dive, dropping by 10% on Thursday. The fall came amid worries that the company’s revenue growth for the current financial year might hit the lower end of its guidance.
KPIT had set a target of 18–22% growth in constant currency (CC) terms for FY25. Analysts are concerned that the company’s growth could settle closer to 18%, which indicates a slower pace compared to recent performance.
ICICI Securities mentioned that if KPIT’s revenue growth comes in at the lower end of its guidance, it would mean a compounded quarterly growth rate (CQGR) of 1% for the second half of FY25. This is a notable slowdown compared to the average CQGR of 4.7% the company recorded over the past four quarters.
In light of this, ICICI Securities has re-initiated coverage of KPIT Technologies with a ‘Hold’ rating. The brokerage has set a target price of Rs 1,700, valuing the stock at 49 times the expected earnings per share (EPS) for the next year.
KPIT’s share price dropped by 9.66%, reaching a low of Rs 1,474.50 on the BSE in early trade on Thursday. This decline has wiped out all the gains the stock had made in 2024. However, KPIT’s share price is still up by 30% when considering the past year’s performance.
ICICI Securities pointed out that KPIT has solid expertise in areas like Software-Defined Vehicles (SDV), infotainment, middleware, and powertrain. These capabilities give the company a strong position in the automotive sector, which has seen increased interest in technological advancements.
However, there are concerns over changing demand patterns within the automotive industry, particularly among European original equipment manufacturers (OEMs). These shifts are creating uncertainties that may affect KPIT’s short-term growth.
Despite these challenges, KPIT managed to maintain a healthy Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) margin of 20.5%. The expectation for revenue to come in at the lower end of guidance is attributed to increased offshoring and delays in implementing projects. On the upside, more offshore work is expected to boost profitability, with the company anticipating a slight improvement in margins.
ICICI Securities mentioned that KPIT expects its EBITDA margin for FY25 to be 0.2–0.3 percentage points higher than initially forecasted. However, the brokerage warned that the third quarter might be slightly weaker due to seasonal factors like furloughs.
ICICI Securities highlighted that the shift towards electrification in the automotive industry could pose risks for KPIT. Auto companies pushing back timelines for electric vehicles may impact KPIT’s business. However, a swift recovery in the passenger vehicle market could serve as a potential upside for the company.