Shares of this multibagger mid-cap stock associated with the ‘IT’ sector plunged more than 7 percent on Tuesday after a well-known Brokerage gave a downgrade of more than 35 percent in the company’s stock.
With a market capitalization of Rs 41,297.02 crores, the stocks of KPIT Technologies Limited closed on Tuesday at Rs 1,506.40 dipping over 7 percent as compared to the previous closing levels of Rs 1,622.30 apiece. Keeping the bearish movement aside, the scrip has gained more than 8 percent in the last five trading sessions.
The downtrend in the stock was observed today after Kotak Institutional Equities, one of the well-known Brokerage firms based in India, downgraded the company’s stock with a target price of Rs 940 exhibiting a downside of around 38 percent compared to the prevailing stock market level.
The Domestic Brokerage mentioned that the company’s shares have gained traction without any “commensurate fundamental catalyst”. Further, it said that the company’s valuation is excessive at 59x estimated for FY2025, extrapolating recent robust performance.
Digging into the quarterly financials. the company has successfully been able to increase its operating profits and net profits consistently. The most recent movement in the former shows a jump from Rs 1,097.62 crores during Q1FY23-24 to Rs 1,199.16 crores during Q2FY23-24, and, the latter from Rs 134.44 crores to Rs 141.4 crores.
Apart from the above, the company has been able to maintain healthy margins with the return on equity (RoE) increasing from 22.26 percent during FY21-22 to 26.55 percent during FY22-23, and, the return on capital employed (RoCE), during the same period, rising from 28.86 percent to 35.12 percent.
Supporting the rally the company’s stock has witnessed, it has delivered multibagger returns of around 117 percent since this year’s inception. The same means that if someone had invested Rs 1 lakh into the stock in January 2023, it would have converted to Rs 2.17 lakhs.
Having a glance at the latest shareholding pattern of the company, the Promoters hold a 39.47 percent stake, and the Foreign Institutional Investors (FIIs) hold a considerable stake of 25.69 percent stake in the company.
KPIT Technologies Limited is a global technology company that specializes in the provision of Information Technology (IT) consulting and Product Engineering solutions and services. The company caters to various customers scattered across a wide range of industries such as Automotive, Manufacturing, Energy, and many more.
Written by Amit Madnani
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