KPIT Technologies Limited shares traded in the red with a downfall of more than 10 percent yesterday and closed at a price of Rs 814.
Such a fall in the stock prices is observed after the global brokerage firm JP Morgan initiated coverage on the stock with an ‘underweight’ rating and gave a target price of Rs 520 indicating a downside of approximately 36 percent as compared to the current price levels.
According to media reports, the target price for the stock is driven by lower structural margins, high client concentration, and excessive valuations.
In addition to the above, Tata Technologies IPO could disrupt the market share of KPIT thereby affecting the scarcity premiums currently enjoyed by the company.
KPIT Technologies Limited, headquartered in Pune, is an Indian multinational corporation engaged in the business of providing embedded software and product engineering services to automotive companies. Popularly known as KPIT, the company has development centers in Europe, USA, Japan, and China, apart from India. It has filed 58 patents as well as published some research papers.
The company, in recent quarters, has reported decent growth in numbers pertaining to revenues and net profits. Revenues increased from Rs 745 crores in Q2 to Rs 917 crores in Q3. Net profits of the company grew from Rs 82 crores in Q2 to Rs 104 crores in Q3.
The profitability ratios of the company, in congruence with the pattern represented in the above parameters, have gone up on a YoY basis. ROE figures moved from 13.15 percent in FY20-21 to 22.24 percent in FY21-22. ROCE numbers too saw positive growth from 16.82 percent in FY20-21 to 28.84 percent in FY21-22.
Apart from the above metrics, the net profit margins of the company improved from 7.23 percent in FY20-21 to 11.35 percent in FY21-22.
According to the quarter ending December 2022, promoters hold a 40.1 percent stake in the company. FIIs, showing faith in the company, have increased their stakes by a considerable amount from 16.88 percent in Q2 to 20.26 percent in Q3.
Written by Amit Madnani
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