Buy KPIT; target of Rs 701: Anand Rathi

Moneycontrol • 3 days ago

Original source

Key Investment Pillars

  • Diversification: KPIT's revenue diversification is improving, with growth across other clients and verticals, offsetting the decline in two large OEM accounts.
  • Product-led growth: Product revenue grew 5% q/q, driving a 60bps EBITDA margin expansion, and AI-first projects contributed ~9% of revenue.
  • Margin recovery: KPIT expects gradual q/q margin improvement, supported by product mix and AI-led efficiencies.
  • Emerging segments: Off-highway is emerging as a key growth driver, with 3 existing clients and 2 additional relationships, leveraging KPIT's SDV expertise.

Thesis Validation Checklist

  • Revenue growth: Monitor broad-based growth across clients and segments.
  • Margin expansion: Track gradual q/q margin improvement.
  • Product traction: Watch for increasing product revenue contribution.
  • AI adoption: Monitor AI-led efficiencies and their impact on margins.
  • OEM spending: Keep an eye on European OEM spending cuts and their impact on KPIT's revenue.