Here's why KPIT Technologies tumbled 8% on Monday

JP Morgan has initiated coverage on the stock with an "underweight" rating and a target price at Rs 540 per share

Shares of KPIT Technologies slipped 8 per cent to Rs 847 on the BSE in Monday's intra-day trade on profit booking amid report that foreign brokerage JP Morgan has initiated coverage with an "underweight" rating on the stock. The brokerage firm given a target price of Rs 540, a 41 per cent downside from its Friday's closing price of Rs 925 per share.

The brokerage sees two major de-rating catalysts -- slowdown in growth and reduction in order book.

As per JP Morgan, KPIT's growth is expected to fall below 20 per cent beyond financial year 2023-24. Second, the announcement of Tata Technologies' IPO has reduced the scarcity premium associated with KPIT's stock.

Meanwhile, in the past three months, KPIT Technologies outperformed the market and surged 31 per cent, as compared to 3 per cent decline in the S&P BSE Sensex. The stock had hit record high of Rs 946.50 on March 31, 2023.

KPIT Technologies is a digital transformation consulting & software integration company, provides cutting edge engineering solution to more than 150 companies & 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.

Engineering spend by the OEM has gone up by 10 per cent, and especially in the CASE (Connected Autonomous Shared and Electric) area gone up by around 20 per cent. Over the years, company has invested heavily in the 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 clients concentration of T25 globally.

"Despite the industry is becoming more cautious about the 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 & inorganic route," analysts at Geojit Financial Services had said in a December quarter result update.

The stock has already hit the brokerage firm’s target price of Rs 923 per share.