KPIT Technologies, an IT company that provides software to automobile firms, has more than doubled investors’ wealth so far in 2021, outperforming the 16 percent rise in the Nifty50, and over 20 percent gain in the S&P BSE 500 index.
The stock with a market capitalization of more than Rs 8,400 crore soared to a 52-week high of Rs 315.90 on the BSE on July 27, but corrected sharply in the following days. It found support near Rs 280.80 and then bounced back.
Technically, the stock is in an uptrend as it is trading well above crucial short- and long-term moving averages such as 5,10,20,50, and 200-Days Moving Averages.
The rise is supported by strong volumes which suggest the momentum is here to stay and could take the midcap IT company to fresh 52-week highs of Rs 380 that translates into an upside of 24 percent from August 4 closing of Rs 305, suggest experts.
The major focus areas of the company are power train (Conventional and electrical), autonomous technology (vision and control systems), connectivity, and diagnostics.
With engineering centers in Europe, the USA, Japan, China, Thailand, and India, KPIT works with leaders in automotive and mobility and is present where the ecosystem is transforming, said the company website.
Technically, the stock is in an uptrend forming higher highs and higher lows on the daily chart. “Any dips in the stock are getting bought at 21-day exponential moving average to take support and trending higher. Volumes on the up move are high indicating buying participation in the stock,” Ashish Chaturmohta, Director Research, Sanctum Wealth Management, said.
“The stock can be bought at current levels on dips to 300 with a stop-loss of 280 for a target of 380 with 6-9 months view,” he said.
KPIT Technologies reported stellar numbers for the June quarter. Net profit rose by nearly 149 percent on a year-on-year basis to Rs 60.24 crore for the quarter ended June 30, 2021. In dollar terms, revenue rose 18.3 per cent year to $77.2 million.
The management shared broad guidance and highlights of plans on revenue, operating efficiencies, and profitability growth for FY22E. “The management plans to invest in practices relevant to strategic clients to boost KPIT’s position in client’s wallet share,” says Chaturmohta.
“In addition, the adoption of a zero-defect delivery process will focus on Engineering Productivity. The company currently derives a majority of its revenues (~85 percent) from repeat businesses. KPIT plans to add to the T21 list to make it T25. Management guides FY22E EBITDA margin to be in 16-17 percent range,” he added.
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