On Saturday, Ambit Capital initiated coverage on KPIT Technologies (KPITTECH:IN), a company that specializes in automotive sector technology solutions, with a Buy rating and a price target of INR 1,925.00. The firm highlighted KPIT's strong performance in digital engineering and software integration, which has resulted in a compound annual growth rate (CAGR) of 18% in revenue over the period from fiscal year 2020 to 2024. Additionally, KPIT's earnings before interest and taxes (EBIT) margins have improved by 750 basis points to 16.2%.
The report underscored the growing importance of software-defined vehicles (SDVs) in the strategies of automotive original equipment manufacturers (OEMs), with spending on SDVs expected to double by fiscal year 2030. KPIT's positioning in the market is expected to allow it to benefit from this trend, especially as automotive R&D spending becomes more focused. The firm also noted the opportunity presented by the shift of insourcing from Tier-1 suppliers to OEMs, which could serve as an additional boost for KPIT.
Ambit Capital projected a revenue growth of 18.7% for KPIT over the period from fiscal year 2024 to 2027, which is the highest among its engineering research and development (ER&D) peers. The firm's forecast includes a margin improvement of 130 basis points over the same period, accounting for factors such as pyramid optimization and employee stock ownership plan (ESOP) costs, as well as R&D investments.
The price target of INR 1,925 set by Ambit Capital is based on a long-term revenue CAGR of 13.8% from fiscal year 2024 to 2041, with an expected EBIT margin of 19.0% at the end of the forecast period. This target reflects the firm's confidence in KPIT's growth trajectory and its ability to capitalize on the evolving automotive technology landscape.
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