At a time when large-cap IT stocks are struggling to climb, mainly due to concerns about interest rate hikes, turmoil in the global financial system, and elevated geo-political tensions, small-cap IT stock KPIT Technologies has been performing remarkably well, hitting new highs with each passing day.
The company's shares, which were trading at ₹145.25 apiece in May 2021, have seen a significant upward trajectory, surging by a staggering 522% to reach an all-time high of ₹904 apiece in Tuesday's trade.
Over the last three years, the stock has gained a whopping 2531%, growing from ₹34.35 apiece to ₹904. In the current year so far, the stock has delivered a stellar return of 25%, while the Nifty IT Index has fallen by 1.4% during the same period.
KPIT Tech is a global technology company specializing in providing product engineering solutions and services to the automobile and mobility sectors. The company made its initial public offering (IPO) in 2019, which was subscribed to over 50 times.
On March 15, the company announced its partnership with Honda to realize the journey of Honda's Software-Defined Mobility (SDM).
"KPIT has worked closely with Honda for the last eight years. It has been a relationship of trust and mutual respect. The partnership in the mid-to long-term will expand to over 2,000 software and vehicle system professionals from KPIT across the globe to power Honda's SDM roadmap until the year 2030 and beyond," said the company's CEO, MR Kishor Patil.
In November 2022, the company said that it had been selected by Renault Group as a strategic software scaling partner for the French automaker’s next-generation SDV (software-defined vehicles) programs.
In October last year, the company completed a Technica Engineering deal to acquire four Technica Group companies for a consideration of Rs. 640 crore. Analysts believe that this acquisition will help KPIT create a unique one-stop shop for the automotive industry in its transformation towards SDVs.
"KPIT operates in an area that is extremely complex and disruptive; therefore, entry into such a segment is extremely difficult for new players."
"The company's complex manufacturing process in autonomous vehicle computing is catching up faster in its outlook. Unlike its competitors, KPIT generates 100% of its revenue from automobile software, giving it a competitive advantage in the software integration space," said domestic brokerage firm Ashika Stock Broking.
For the December-ending quarter, the company reported its highest quarterly net profit of ₹104 crore. The company had reported a net profit of ₹70 crore in Q3 FY22 and ₹84 crore in Q2 FY23.
It reported a 47.42% increase in overall revenues during Q3FY23, at ₹917 crore, compared to ₹622 crore in the same quarter last fiscal. For Q3, it added a TCV (total contract value) of $272 million, out of which one is $100 million with Renault.
Following the company's robust performance, brokerage firm Geojit Financial Services has maintained its "buy" rating on the stock with a target price of ₹923 apiece.
"Despite the industry becoming more cautious about spending, KPIT has not seen any deal rollover from its top clients in the near term. Positively, the company is well placed to take advantage of its SDV (software-designed vehicle) program through organic & inorganic routes," said the brokerage.
09 analysts polled by Mint Genie on average have a 'hold' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.