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Shares of KPIT Technologies Ltd., having already declined 10% over the last two sessions, will again be in focus on Wednesday, July 1, after the company warned of its June quarter results to be weak.
What Did KPIT Tech Say On June 30?
On Tuesday evening, KPIT Tech said in an exchange filing that it expects its US Dollar revenue to decline 1% year-on-year for the June quarter, compared to the same period last year.
It attributed this warning to a sudden drop in revenue over the last few weeks due to the recent profit warnings and a deteriorating business outlook at multiple European auto companies, including BMW.
The management went on to add that the slowdown was not anticipated earlier and has materialized recently.
Along with the drop in US Dollar revenue, KPIT Tech also expects its Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA), and net profit margins to decline on a sequential basis, along with a limited room for cost optimization in the near-term.
However, the company has reiterated that this is a short-term phenomenon and that the cost-cutting by clients in the long-term could accelerate outsourcing.
The company's guidance of a 1% drop is a miss compared to brokerage firm Motilal Oswal's expectations of a 2% growth. The brokerage expects US Dollar revenue for KPIT Tech to grow by 1.6% in financial year 2027.
What Are KPIT Tech's Current Valuations?
KPIT Tech's two-day fall has also begun to impact the rest of its ER&D peers, with shares of Tata Technologies and Tata Elxsi, both declining across Monday and Tuesday.
Shares of KPIT Tech are already down 42% in the first six months of the year, and from its record high levels, the fall is more pronounced, at 65%.
At the current price, KPIT Tech trades at a one-year forward price-to-earnings multiple of 20 times, a far cry from the 50 times multiple it traded at its peak.
Why JPMorgan Downgraded KPIT Tech?
Brokerage firm JPMorgan has downgraded KPIT Tech to "underweight" from its earlier rating of "neutral" and has also cut its price target to ₹550 from its earlier rating of ₹700.
JPMorgan believes that the guidance is reflective of the profit warnings earlier this month from its BMW account, which is its largest client, accounting for 12% of its revenues. Issues at Volkswagen are also impacting the company's performance.
With a weak start to the year and no signs of sequential growth until the fourth quarter of this financial year, JPMorgan believes that this year will be the second straight year when KPIT Tech reports a decline in its organic revenue. The brokerage estimates a 2.6% drop in organic revenue this year, compared to a 1.4% drop in financial year 2026.
As a result of this, JPMorgan has cut KPIT Tech's revenue estimates by 5% to 8% and margin estimates by 20 to 270 basis points over financial year 2027 to 2029, resulting in cuts to its Earnings per Share (EPS) estimates by 9% to 22%.
The target multiple for KPIT Tech has also been cut to 17 times from 21 times earlier.
KPIT Tech's Slowdown Warnings
The entire ER&D sector began to decelerate sharply in financial year 2025 itself due to weak spending by auto OEMs, growth slowdown, uncertainties over tech EV Vs Hybrid Vs ICE vehicles, Trump tariffs, and now comes the recent slowdown and profit warnings.
During the second quarter of financial year 2025, KPIT Tech had guided for growth to be at the lower end of its earlier range, citing regional challenges, particularly in Europe.
Come April 2025, which was the fourth quarter of the financial year, the company did not provide any growth guidance for financial year 2026, citing uncertain demand and slow deal ramp-ups.
However, in April this year, the company had said that financial year 2027 looks more promising than financial year 2026 in terms of revenue growth visibility and market opportunity. It did acknowledge that the first half of the financial year will have an impact of two large programs coming to an end.
For financial year 2027, the company expects margins to be between 20.5% to 21.2%, compared to 20.8% in financial year 2026.
Shares of KPIT Tech had ended 6% lower on Tuesday at ₹670.5 and were the second-worst performers on the Nifty 500 index.
