Reduce KPIT Technologies: target of Rs 1050: ICICI Securities

ICICI Securities's research report on KPIT Technologies

KPIT reported revenue and EBIT margin in line with our estimates in Q2FY26. Key positives: 1) Management expects growth to stabilise in Q3 (flat to 1% QoQ CC) and pickup from Q4. 2) It won a multi-mn dollar 3-year deal with a European OEM – a large part of this deal is yet to reflect in TCV, 3) shift from services to solution-based selling (18% of revenue), leading to an improvement in profitability. However, the global auto industry’s challenges persist, especially in the US, where OEMs have paused EV & battery programmes and new vehicle production programmes have been pushed ahead by 1-2 years. We cut EPS by 9%/7.5%/6% for FY26/27/28E led by a cut in margin estimates (factoring in higher other expenses, D&A charge due to consolidation of Caresoft and investments in sales) and lower other income.

Outlook

We continue to value KPIT at 30x on 1-year forward EPS of INR 35 to arrive at a revised TP of INR 1,050 (vs. INR 1,200 earlier). Retain REDUCE.