Shares of KPIT Technologies took a hit after global brokerage firm JPMorgan initiated coverage on the stock with an underweight (UW) rating and set a target price of Rs 520, indicating a downside of nearly 44 per cent compared with the closing price of March 31, 2023. The global brokerage sees lower structural margins, risks from single vertical, high client concentration and excessive valuation for KPIT Technologies.
To be sure, KPIT Technologies emerged as one of the solid IT multibaggers which delivered robust return to investors since Covid-19 lows. Shares of the company zoomed 2,539 per cent to Rs 925 on March 31 from Rs 35.05 on March 30, 2020, a span of three years. This shows that an investment of Rs 10 lakh in the stock would have turned to over Rs 2.60 crore in the past three financial years. However, the scrip plunged 12.02 per cent to Rs 813.80 on the first trading session of FY2024.
The price-to-earnings (P/E) ratio of KPIT Technologies was at 86.79 times on March 31 against the three-year average of 54.04 times, indicating an overvaluation of the stock. The ratio is used for valuing a company that measures its current share price relative to its earnings per share.
“Key de-rating catalysts for KPIT are slowing growth beyond FY24 to
For the nine months ended December 31, 2022, KPIT Technologies reported 32 per cent year-on-year growth in consolidated gross sales at Rs 2,347.67 crore. On the other hand, the consolidated net profit of the company increased 38 per cent YoY to Rs 269.40 crore during the same period. The consolidated net profit of the company stood at Rs 274.23 crore in FY22, Rs 146.14 crore in FY21 and Rs 146.59 crore in FY20.
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