Anand Rathi has Buy rating on multibagger stock that has rallied 145 percent this year

09 Nov , 2021 By : Kanchan Joshi

KPIT Technologies reported a strong earnings for the quarter ended September as the tech firm's consolidated net profit more than doubled to Rs65 crore from Rs27 crore in the year-ago period as growth was across all key regions. Shares of KPIT Tech have given multibagger return of around 145% this year.

Brokerage firm Anand Rathi sees further upside on the multibagger stock post its Q2 results and has maintained its Buy rating with a target price of Rs400 per share as KPIT Tech's revenue growth was in line with estimates, and it expects high-teen growth. However, the broker sees sluggishness in the T-25 clients as a key risk.

“Growth was across all key regions (the US, Europe, Japan) but in service lines, Powertrain, Diagnostics and Autosar led the way. The top-25 accounts continue to grow (20% y/y). The better-than-expected 17.6 percent EBITDA margin, despite Q2 wage hikes, is likely to be high (guidance for FY22: ~17.5%)," the brokerage note stated.

KPIT Tech's revenue from operations stood at Rs590.8 crore for the quarter under review, as compared to Rs485.4 crore in the July-September 2020 period. The company has increased its revenue growth outlook for FY2022 to 18-20%.

The company's margins during the second quarter were aided by better realisation, lower subcontracting costs and greater efficiency (offshore and utilisation), the brokerage pointed. The management expects a 17.5% FY22 margin, on the continued operating leverage.

Anand Rathi further highlighted that KPIT is looking to match larger engineering peers growth and margins (gap narrowed LTM with LTTS). Both KPIT and L&T Technology Services' (LTTS) revenues grew 23% year-on-year (YoY) and EBITDA, 50% from a year-ago quarter. In Q2, the strategic-25 accounts grew for the fifth straight quarter.