The first trading day of the new financial year 2023-24 (FY24) didn’t go well for KPIT Technologies Ltd. This was in complete contrast to the last trading day of FY23 (March 31, 2023) when the stock touched its 52-week high level (intraday) of Rs 946.50. On April 3, shares of KPIT Tech settled 12.49 per cent lower at Rs 809.50 over its previous close of Rs 925. That said, the counter has gained 16.21 per cent so far this year and 83.97 per cent compared to its one-year low of Rs 440, a level seen on May 26 last year.
The fresh weakness in the counter came after foreign brokerage JPMorgan initiated coverage on the stock with an ‘underweight’ rating and a 12-month target of Rs 520, suggesting a potential downside of 35.76 per cent, based on Monday’s closing price.
Support on the counter could be seen at Rs 780, followed by Rs 750 and Rs 670 levels, analysts said.
Jigar S Patel – Senior Manager – Technical Research Analyst at Anand Rathi Shares and Stock Brokers, said, “A correction was due. At the current juncture, one should book profits between Rs 855-865, if again tested. Also, on daily MACD bearish divergence is seen which is a matter of concern. A major broad range for KPIT would be Rs 760-870 in the coming few weeks. Fresh buy is not advised.”
Ravi Singh, Vice-President and Head of Research at Share India, said, “KPIT Technologies is a mid-cap tech company that provides software solutions to the automotive industry. KPIT presented robust revenue growth from Rs 622 crore in December 2021 to Rs 917 crore in December 2022 with stable EBITDA margins, hovering around 18 to 19 per cent. However, this strong financial performance does not justify its high valuation. The stock is currently trading at 64x its earnings which is way higher than its peers, like Tata Elxsi and Persistent systems. KPIT’s EV/EBITDA ratio is more than 34 and the stock is trading at 16 times its book value. High client concentration also poses a risk in a global economic slowdown scenario that could impact revenue growth.”
Pravesh Gour, Senior Technical Analyst at Swastika Investmart, said, “On the daily chart, the counter is in a classical uptrend, but in the last trading session, it has faced profit-taking from the higher levels and retested its previous breakout level of around Rs 750 after hitting a fresh 52-week high. If it holds the Rs 750 level in the near term, then it may reach Rs 850. However, on the downside, if it breaks down below the Rs 750 level, then Rs 670 will be the next support level.”
AR Ramachandran from Tips2trades said, “The counter looks bearish on the daily charts with strong support at Rs 780. A daily close above resistance of Rs 855 only will revive the trend to bullish.”
The stock traded higher than the 50-day, 100- and 200-day moving averages but lower than the 5-day and 20-day moving averages. The counter’s 14-day relative strength index (RSI) came at 43.90. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company’s stock has a price-to-equity (P/E) ratio of 75.95.
The scrip has an average target price of Rs 794, as per Trendlyne, suggesting a potential drop of 2.12 per cent. It has a one-year beta of 0.93, indicating low volatility.
Meanwhile, Indian equity benchmarks would remain closed today and also on Friday in this holiday-shortened week. The domestic benchmarks would be shut today on account of ‘Mahavir Jayanti’ and on April 7 due to Good Friday.
On Monday, the domestic benchmarks extended their gains for the third straight session in a highly volatile trading session. The 30-share benchmark BSE Sensex settled 115 points or 0.19 per cent higher at 59,106, while the broader NSE Nifty moved 38 points or 0.22 per cent higher to close at 17,398.
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