Multibagger IT stock faces target price cuts after Q4 results. Do you own?

Multibagger small-cap IT stock in focus: Domestic brokerage firms have trimmed their target multiples on KPIT Technologies, a leading global pure-play engineering, research, and development (ER&D) services company, following the company's March quarter performance (Q4FY25).

While the company reported numbers in line with analysts’ estimates, delivering nineteen sequential quarters of growth in revenues and operating profits, management failed to provide revenue guidance for FY26, citing an uncertain demand environment and a soft first half, prompting analysts to cut their earnings estimates.

KPIT is a global technology company, specialising in product engineering solutions and services for the automobile and mobility sectors. The company derives a majority of its revenue from the European region, which is currently witnessing a drop in automobile sales, higher tariffs, and rising competition from China.

These headwinds are expected to hurt global automobile manufacturers, with delayed client decision-making and potential cuts in R&D budgets impacting service providers like KPIT. Given its high exposure to auto OEMs, the company remains particularly vulnerable to any slowdown in R&D investments.

For the March ending quarter, the company reported a 47.5% YoY jump in its consolidated net profit of ₹245 crore in Q4, while the revenue from operations came in at ₹1,528 crore, a 16% YoY jump.

Slow start to FY26 expected amid deal delays

Domestic brokerage firm Kotak Institutional Equities expects a slow start to FY26 due to delayed deal ramp-ups and sporadic instances of smaller project cancellations. The brokerage projects modest growth of 0.5% QoQ in Q1FY26E, with gradual improvement through the year, building in 3–4% QoQ growth in Q3–Q4FY26E.

Kotak stated that an extended stalemate on tariffs and macro uncertainties would pose downside risks to its revenue growth estimates. It also highlighted rising competition for large deals and slowing demand, both of which could put pressure on profitability.

"We believe traditional levers such as utilisation have limited room, while tailwinds from offshoring and cost moderation will be reinvested in the business to strengthen client relationships as part of large deals. We expect an EBIT margin of 17.1% in FY2026E," Kotak said.

ICICI Securities, on the other hand, noted that while KPIT reported a strong deal TCV of USD 925 million—a 16% YoY jump in FY25—deal ramp-ups have been slow. The brokerage expects recently won large deals to ramp up from H2FY26.

KPIT is betting big on China (which has disrupted global industry) and believes helping European and US OEMs to catch up with Chinese competition is a new big opportunity. 

While the company may continue to outperform in revenue growth within the ER&D pack, the brokerage believes downside risks remain, as the global auto industry grapples with tariffs, competition from China, and slowing demand.

Macro headwinds prompt target price cuts

Amid cautious outlook, Kotak has trimmed its EPS estimates for FY2026–28E by 10–13%, factoring in 8–9% lower revenues and near-term margin pressures, with a gradual improvement expected over the medium term. It has also lowered its EBIT margin assumption by 100–140 basis points to a range of 17–18% during the period.

As a result, the brokerage cut its target price on the stock to ₹1,000 per share from ₹1,170 earlier, while retaining a 'sell' rating. According to the brokerage, freezes in client spending on certain programs due to an unfavorable macro environment will further impact KPIT’s growth visibility, even as valuations remain rich.

ICICI Securities maintained its 'reduce' rating on the stock with a target price of ₹1,100 apiece. The stock has already lost 35% of its value over the last nine months; however, it still trades with a 2,148% gain over the past five years and a 3,600% gain from its March 2020 low of ₹34.35 apiece.

In the latest trading session, it ended 0.89% lower at ₹1,253 apiece on the BSE.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.