KPIT Technologies Tumbles 16% As Weak Europe Demand Triggers Profit Warning

Shares of KPIT Technologies plunged more than 16% on Wednesday after the automotive software and engineering company warned that its June-quarter performance would fall short of expectations, citing a sudden slowdown in demand from European automotive clients.

At around 12:23 pm, the stock was trading at ₹562.50, down 16.24%, making it the biggest loser on the BSE Midcap index. The sharp selloff also extended the stock's one-year decline to more than 54%, compared with a 6.4% fall in the Nifty 50.

The weakness followed a preliminary business update for the first quarter of FY27, in which KPIT said revenue would come in below its earlier expectations after an abrupt deterioration in demand from certain European original equipment manufacturers (OEMs). The company also indicated that business conditions are likely to remain weak in the September quarter.

Separately, nearly 62.61 lakh shares, representing 2.24% of the company's equity, changed hands through block deals at an average price of ₹375 per share. The transactions were valued at around ₹362.4 crore.

European Slowdown Hits Revenue And Margins

KPIT said it now expects its reported US dollar revenue to decline by around 1% year-on-year in the June quarter, reversing earlier growth expectations.

The company attributed the slowdown to recent profit warnings and weaker business conditions at several European automotive manufacturers, which resulted in an unexpected reduction in technology spending over the last few weeks.

While describing the weakness as a near-term phenomenon, KPIT said it believes the long-term trend towards outsourcing and automation remains intact.

However, the company cautioned that the impact on profitability would be greater than the decline in revenue.

KPIT expects both EBITDA margin and net profit margin to contract sequentially in the June quarter, as it does not have sufficient time to reduce costs in line with the sudden fall in revenue.

The company also said revenue in the second quarter of FY27 is likely to remain broadly similar to the June quarter, suggesting that the slowdown could persist in the near term.

JPMorgan Downgrades Stock

Following the business update, JPMorgan downgraded KPIT Technologies to 'Underweight' from 'Neutral' and cut its target price to ₹550 per share from ₹700.

The brokerage said it now expects the company to report a 1% year-on-year decline and a 4% sequential decline in constant-currency revenue during the June quarter.

According to JPMorgan, the weakness is largely linked to spending cuts by BMW and Volkswagen, with BMW accounting for approximately 12% of KPIT's overall revenue.

The brokerage also expects EBITDA margins and net profit margins to decline sharply, noting that the company would be unable to implement meaningful cost reductions within a single quarter.

JPMorgan warned that the first half of FY27 is likely to remain weak, with sequential revenue growth expected only by the fourth quarter.

Estimates Cut Across FY27-FY29

Reflecting the weaker outlook, JPMorgan reduced its FY27-FY29 revenue estimates by 5-8%, while cutting EBITDA margin forecasts by 20-270 basis points.

The brokerage also lowered earnings per share estimates by 9-22% and reduced its target price-to-earnings multiple to 17 times from 21 times.

It further cautioned that FY27 could become the second consecutive year of organic revenue decline for KPIT Technologies if demand from European automotive customers remains subdued.

Analysts said investors will closely watch management commentary during the company's quarterly results for greater clarity on the recovery timeline and spending outlook from key automotive clients.