JPMorgan has adjusted its outlook on KPIT Technologies (KPITTECH: IN), reducing the price target to INR1,900 from INR2,000 while still maintaining an Overweight rating on the stock.
The revision reflects a tempered expectation for the company's financial year 2025 (FY25) revenue growth and anticipates a softer second half (2H) of the year.
The analyst noted that KPIT Technologies has lowered its FY25 constant currency (CC) revenue growth forecast to the lower end of its 18-22% guidance range.
This adjustment is attributed to several factors, including delays in deal ramp-ups, deal closures, and an increase in offshoring to enhance cost efficiencies for clients.
These issues are expected to contribute to a weaker performance in the latter half of the year and potentially affect growth in financial year 2026 (FY26).
Despite the near-term challenges, the firm anticipates that KPIT Technologies will likely experience a negative stock reaction in the short term, which could subsequently offer a favorable buying opportunity.
The analyst remains optimistic about the medium-term (MT) growth prospects in the Automotive Engineering Research & Development (Auto ER&D) sector, despite short-term (ST) difficulties.
The company also expects that the offshoring strategy will lead to improved margins. KPIT Technologies projects its FY25 Ebitda margins to be closer to 21%, slightly higher than its previous guidance of 20.5%. In response to these projections,
JPMorgan has reduced its revenue and earnings estimates for the company by 3-6%, resulting in a 5% decrease in the price target.
The analyst concluded by stating that KPIT Technologies has a history of conservative guidance, which tends to increase throughout the year for both growth and margins. Therefore, the current reduction in guidance is viewed as a more realistic expectation.
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