KPIT Technologies nearly doubles in 2 months on strong earnings outlook

Shares of KPIT Technologies hit a new high of Rs 595, on rallying 7 per cent on the BSE in Tuesday’s intra-day trade on back of heavy volumes on expectation of strong earnings. The stock of information technology (IT) consulting & services company was quoting higher for the sixth straight trading day, surging 30 per cent during the period.

At 11:13 am; it traded 5 per cent higher at Rs 587.50, as against a 0.65 per cent rise in the S&P BSE Sensex. The trading volumes at the counter jumped 1.5 times with a combined 2.25 million equity shares changing hands on the NSE and BSE.

Since November 1, 2021, the stock has zoomed 93 per cent after KPIT Technologies raised outlook for revenue and profit for the financial year 2021-22 (FY22). The company said, for FY22, revenue growth outlook has been increased to 18 to 20 per cent, while earnings before interest, tax, depreciation and amortization (Ebitda) margin outlook has been revised to 17.5+ per cent. In comparison, the S&P BSE Sensex was down 2.6 per cent during the same period.

The management had said the company is witnessing a robust demand environment resulting in strong order inflow and pipeline. With improved business visibility, the company has increased its revenue and profit outlook for the year.

KPIT won a multi-million-dollar strategic engagement from a leading European car manufacturer in the Electric Power train domain. The engagements pans over 5 years of software development and integration work. This will be followed by software maintenance. The total deal value is expected to be $52 million, the company said.

KPIT’s business is focused entirely on the mobility industry with its niche offerings in power trains, autonomous and connectivity categories. Further, KPIT enjoys an established client base with BMW, Eaton and other global OEMs and tier I suppliers to whom it offers multiple services.

KPIT’s niche offerings and strong relationships have driven healthy revenue growth over the years. The company offers software IP, software integration, feature development, and verification and validation services to global original equipment manufacturer (OEMs) and tier-I suppliers across its key practices.

EV demand is increasing around the globe owing to high carbon emission by conventional vehicles, leading Governments across countries to incentivise electrical mobility. This has led to increase in R&D expenses from OEMs and tier-I suppliers on emerging technologies such as autonomous vehicles and EVs, as well as addition of new features in vehicles to stay competitive in the industry. ICRA believes these factors provide healthy revenue visibility for KPIT over the near to medium term.