Leading AI and automotive solutions stock gets a ‘Buy’ tag on it from Axis Direct which is one of the leading and well known financial services firm, with an upside potential 32 percent from its previous price
KPIT Technologies
With a market capitalization of Rs. 31,012 Crores,On October 30, 2023 the shares of KPIT Technologies were trading at Rs. 1,133 up 0.40 percent from its previous day close price.
Axis Direct, one of the well-known Financial Services firm, has given a ‘Buy’ tag to the company’s stock with a target price of Rs 1500 indicating a potential upside of 32 percent as compared to the closing stock price levels.
The rationale behind providing such a recommendation pertains to various trigger points Comprising,
Capitalising the growing investment in the Automobile vertical:Given the swift shift of ER&D (Engineering Research and Development) spending toward electric and software technologies, it anticipates that original equipment manufacturers (OEMs) will increasingly depend on strategic partners such as KPIT, known for their software expertise. This trend is poised to unlock substantial growth opportunities for the company in the foreseeable future.
Accelerating demand for digital ER&D services: Digital engineering spends are accelerating across industries, and companies moving from
Traditional to digital engineering will quickly adopt digital engineering. Major industries such as Manufacturing, BFSI, Media & Technology, Retail, Healthcare Payers & Providers, and Travel & Hospitality are developing new products and services to differentiate themselves in their respective industries, thereby creating remarkable opportunities for the company.
Robust client evaluation framework: KPIT’s strategy is to focus on select strategic OEMs and Tier-1 suppliers by deep mining them . Each of the company’s top customers is selected through the Global Account Management (GAM) framework after evaluating, Its importance in the overall mobility ecosystem, Level of relationship and commitment, Strategic fit for practice offerings and Quality of engagement. The company believes in an environment of high disruptions and it is imperative to work with clients who are expected to stay relevant in a changing business environment. Thus, it sees KPIT’s client evaluation framework as a key process.
Robust investments in newer technologies by the Auto Industry: Autonomous driving technologies and electrified powertrains reduce costs and promise more cost-effective and
profitable trucking and logistical service operations. Despite a slow start, the criticality of these technologies to customer profitability indicates a faster pickup in CASE R&D spending for commercial vehicle manufacturers moving forward.
KPIT has a resilient business model and strong earnings visibility through its multiple long-term contracts with globally leading brands, KPITis well positioned to capture the immense growth opportunity in the industry, and It expects KPIT will attain strong revenue growth of 29% CAGR over FY24E-FY26E.
The company’s revenue grew 38.34 percent from Rs. 2,432.39 Crores in FY22 to Rs. 3,365.04 Crores in FY23, accompanied by increasing profits of Rs. 276.24 Crores to Rs. 386.86 Crores.
It has reported a return on equity (ROE) of 26.55 percent and a return on capital employed (ROCE) of 35.12 percent, it has made good returns on its equity and capital employed.
According to the latest shareholding data available for the September 2023 quarter, the company’s Promoters hold 39.47 percent stake, the Domestic Institutional Investors hold 12.25 percent and the Foreign Institutional Investors (FII) hold 25.69 percent.
KPIT is a global technology company, it provides embedded software, product engineering services and AI & Digital solutions to automotive players in the market.
Written by: Bharath K.S
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