Rs 91 to Rs 873: This IT stock turned into a multibagger in three years; buy, sell or hold?

Stock of KPIT Technologies has turned into a multibagger in the last three years, rising from Rs 91.2 on February 12, 2020 to Rs 873 today, delivering 857% returns during the period. An amount of Rs 1 lakh invested in KPIT Technologies stock three years ago would have turned into Rs 9.57 lakh today. In comparison, Sensex has risen 46 per cent during the period. The stock touched an all-time high of Rs 873 today, rising 2.13 per cent against the previous close of Rs 854.80 on BSE.

Also WATCH WPL Auction 2023 Costliest Players: Smriti Mandhana, Ashleigh Gardner, Harmanpreet Kaur & More 

Shares of KPIT Technologies are trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.  

In a year, the stock has gained 43 per cent and gained 17.24 per cent this year. Total 1.05 lakh shares of the firm changed hands amounting to a turnover of Rs 8.97 crore on BSE. 

Market cap of the firm stood at Rs 22,690 crore. The stock hit a 52-week low of Rs 440 on May 26, 2022 . 

Returns of Peers 

The firm has outshined peers when it comes to returns to shareholders during the last three years. While L&T Technology Services stock zoomed 112.63 per cent, Persistent Systems shares climbed 576.28 per cent during the period.  Shares of another IT services firm Coforge have rallied 121% in the last three years.  

The rally in the stock can be attributed to strong earnings of the firm. 

Financial Performance 

The IT firm logged a consolidated net profit of Rs 104 crore in the December 2022 quarter (Q3 FY23), up 48 per cent from Rs 70.3 crore in the same quarter a year ago. The company’s revenue from operations stood at Rs 917.11 crore in Q3 FY23, a year-on-year (YoY) growth of 47 per cent from Rs 622.36 crore in Q3 FY22. 

Sales rose 47.36% to Rs 917.92 crore in the last quarter against Rs 622.37 crore in the corresponding quarter of the previous fiscal.  EBITDA rose 45.19% to Rs 166.94 crore in the December quarter against Rs 114.98 crore in the corresponding quarter of the previous fiscal. 

In the second quarter of the current fiscal, the firm, reported a profit of Rs 83.48 crore against Rs 65.10 crore in Q2 of FY22. 

Revenue from operations rose to Rs 744.crore in Q2 compared to Rs 590.87 crore in the corresponding period of last fiscal. 

On a yearly basis, net profit zoomed rose 87.65% to Rs 274.23 crore in the last fiscal against Rs 146.14 crore in the fiscal ended March 2021. Sales rose 19.48% to Rs 2432.39 crore in fiscal ended March 2022 against Rs 2035.74 crore for the fiscal ended March 2021.    

Analysing Q3 show 

Post the recently announced KPIT Tech’s earnings for the third quarter, Anand Rathi expects the stock to reach Rs 850 (from the earlier target of Rs 700)  

“With revenue up 2.4% q/q (org. est.), KPIT’s Q3 was ahead of peers and the broader industry. Technical was fully integrated and had a seasonally strong Q3. $272m TCV incl. the Renault deal and a strong deal pipeline (up 70% y/y) suggest a strong Q4 too for KPIT. Despite integration costs the EBITDA margin was flattish q/q and y/y, and appears to be heading to 20%. We roll forward to FY25 and upgrade to a Buy, raising our target to Rs 850 (from Rs 700), at 40x FY25,” said the brokerage. 

Post the recently announced KPIT Tech’s earnings for the third quarter, Anand Rathi expects the stock to reach Rs 850 (from the earlier target of Rs 700)  

“With revenue up 2.4% q/q (org. est.), KPIT’s Q3 was ahead of peers and the broader industry. Technical was fully integrated and had a seasonally strong Q3. $272m TCV incl. the Renault deal and a strong deal pipeline (up 70% y/y) suggest a strong Q4 too for KPIT. Despite integration costs the EBITDA margin was flattish q/q and y/y, and appears to be heading to 20%. We roll forward to FY25 and upgrade to a Buy, raising our target to Rs 850 (from Rs 700), at 40x FY25,” said the brokerage.  

Abhijeet from Tips2trade said,” KPIT Technologies is bullish but also overbought on the Daily charts with a strong resistance at  Rs 820. Investors should book profits at current levels and wait for lower support levels of  Rs 710-725 to buy for targets of  Rs 855 in the near term.” 

Osho Krishan, Sr. Analyst – Technical & Derivative Research, Angel One Ltd said.”KPIT Tech has witnessed a stellar rally in the past two trading weeks and has jumped nearly 20 percent. The stock is currently hovering at its lifetime high zone and is placed above all the major moving averages on all time frames. However, post the recent vertical move, the probability of cool-off or profit booking is relatively higher, and one should not be complacent in the current zone. On technical parameters, the Rs 800-780 zone is likely to provide cushion from any blip, while the sacrosanct support lies around Rs 740 odd levels. On the higher end, the stock is well-versed to continue its upward march in uncharted territory, and one may utilise any dip towards the mentioned zone to accumulate the counter from a short to medium-term perspective.”  

About KPIT Technologies  

KPIT Technologies Limited is an India-based technology company, which is focused on automobile engineering and mobility solutions. The company offers electronic and mechanical engineering solutions to its customers. 

It also analyses data for diagnostics, maintenance and tracking of assets and related connectivity solutions, including data and analytics beyond embedded or mechanical engineering and their connectivity and integration with back-end information technology (IT) systems and platforms for the automobile and mobility sector. 

Also read: 6 SmallCap stocks where HNIs upped

 Also read: Suzlon Energy, Adani Ports, M&M & Bharti Airtel: Stocks that HNIs bought with both hands in Q3

Also read: City Union Bank shares dive 17% after Q3 results; here’s what analysts say