KPIT Technologies Shares 12% crash as JP Morgan Initiates Coverage with “Underweight” Rating||
why is the crash 12% in KPIT tech?
In Monday’s intra-day trade, shares of KPIT Technologies slipped 12% to Rs 814 on the NSE due to profit booking amid a report that JP Morgan has initiated coverage with an “underweight” rating on the stock. The brokerage firm has given a target price of Rs 540, representing a 41% downside from its Friday closing price of Rs 925 per share.
According to JP Morgan, there are two major de-rating catalysts for KPIT Technologies. The first is the expected slowdown in growth, which is projected to fall below 20% beyond the financial year 2023-24. The second is the reduction in the order book. JP Morgan also notes that Tata Technologies‘ IPO announcement has reduced the scarcity premium associated with KPIT’s stock.
Despite these concerns, KPIT Technologies has outperformed the market in the past three months, surging 31% compared to the 3% decline in the S&P BSE Sensex. The stock hit a record high of Rs 946.50 on March 31, 2023.
KPIT Technologies is a digital transformation consulting and software integration company that provides cutting-edge engineering solutions to more than 150 companies and enterprises in the field of CASE Mobility. The company derives most of its revenue from innovative technology, and the scalability of the industry is huge. Automotive manufacturers are prioritizing investment in new-age technologies, and KPIT is at the forefront of these.
The engineering spend by the OEM has increased by 10%, and especially in the CASE (Connected Autonomous Shared and Electric) area, it has increased by around 20%. Over the years, the company has invested heavily in technologies for automotive companies and continues to maintain its leadership position in this area. The company is well-positioned to increase its focus on electric vehicles, especially in the US and Europe, with a top client concentration of T25 globally.
“Despite the industry becoming more cautious about spending, KPIT has not seen any deal rollover from its top clients in the near term. Positively, the company is well placed to take advantage of its SDV (Software Designed Vehicle) program through organic and inorganic routes,” analysts at Geojit Financial Services said in a December quarter result update.
KPIT target price per share:
It is worth noting that the stock has already hit the brokerage firm’s target price of Rs 923 per share.
Investors should take note of the concerns raised by JP Morgan, but they should also consider the company’s strengths in the automotive industry and its focus on electric vehicles. The automotive industry is undergoing a significant transformation, and KPIT Technologies is well-positioned to take advantage of the opportunities presented by this shift. While the near-term outlook may be uncertain, the long-term prospects for the company remain positive.
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