Buy KPIT Technologies; target of Rs 1760: Geojit Financial Services

Geojit Financial Services research report on KPIT Technologies

KPIT Technologies Ltd., a digital transformation consulting & software integration company, provides cutting edge engineering solutions to more than 150 companies & enterprises in the field of CASE mobility. We expect revenue and PAT CAGR to grow by 19% and 20% over FY25E-FY27E respectively, on the back of deal wins, pricing benefits and inorganic growth. Q2FY25 revenue came in at 20% YoY in constant currency, driven by middleware architecture consulting and software integration from the top strategic clients. EBITDA margin improved by 21bps YoY on account of strong volume growth and favourable currency mix. Despite investment in technology & and salary hike we expect the margin to stabilize at 20-21% for the full year. The growth in the mobility & autonomous space is a priority for customers and KPIT continues to hold strong domain expertise by adding more capabilities through JV and acquisitions. The Board has sanctioned a plan to raise up to ₹2.88 billion implying a equity dilution of up to 6% through a Qualified Institutional Placement (QIP), suggesting possible future acquisitions to drive growth.

Outlook

Given the recent correction and fundamentally strong superior execution capability we rollover and value KPIT at its long term historical average at 40x on FY27E EPS with a target price of Rs.1,760 and reiterate with a Buy rating at CMP.

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