KPITTECH - KPIT Technologies Ltd Share Price

Management provided an optimistic outlook for KPIT Technologies, highlighting year-on-year revenue growth of 12.8% in rupee terms and 7.8% in dollar terms. The company's EBITDA witnessed a growth of 12.4%, maintaining a healthy margin of 21%. The net profit after tax (PAT) stood at INR 1,719.1 million, although it was impacted by one-time income from the previous quarter and a negative currency impact of INR 272 million.

For the quarter, KPIT reported total wins of $241 million mainly driven by demand in powertrain and connected technologies, especially in passenger vehicles across the U.S. and Europe. Despite some challenges in the commercial segment, management anticipates a growth rebound in that area starting next quarter. The revenue quality improved, as fixed-price project share increased from 60% to 62.5%, reflecting a strategic shift to enhance flexibility and profitability.

Management expressed confidence in the company's pipeline, indicating stronger prospects in China and India. They expect H2 FY '26 to perform better than H1, driven by ongoing demand for AI-infused mobility solutions and a focus on operational efficiencies.

Key points highlighted by management include:

1. Revenue Growth: Year-on-year growth of 12.8% in rupees and 7.8% in dollars, with strong EBITDA margins at 21%.
2. Fixed-Price Projects: Increased share of fixed-price projects to 62.5% from 60%, enhancing delivery flexibility.
3. Geographic Expansion: Growing pipelines in China and India, with specific engagements like the JSW project anticipated to contribute from Q3.
4. AI Competency: Strong positioning in AI-driven mobility solutions expected to offer competitive advantages.
5. Market Stability: Anticipating a settling of geopolitical uncertainties that could enhance client spending and program acceleration in upcoming quarters.

Overall, KPIT is set on a path for growth as it adapts to changing market dynamics while leveraging strategic opportunities in emerging regions.

1. Question: "Kishor, you mentioned that you expected tariff which are uncertain to settle down in a quarter. Is this based on client conversations that we're getting confidence that things will start improving from 3Q onwards?"

   Answer: Yes, our discussions with clients and insights from the market suggest that we should see more certainty regarding tariffs in about a quarter. We expect increased client spending as they prioritize speed for their program completions during this period of uncertainty.

2. Question: "Have you seen any pickup in terms of the projects which were stalled or delayed due to macro uncertainty in last few months? And do you expect Q2 to stabilize?"

   Answer: We're seeing some new project starts compensate for earlier delays, but ramp-up hasn't met our expectations in Q1 and Q2. However, we anticipate growth momentum in H2 based on our ongoing conversations with clients.

3. Question: "Could you mention the demand trends you are seeing across various geography markets like Europe, Asia and U.S...?"

   Answer: There's growing demand in Europe for powertrain and autonomous solutions, which we expect will ramp up in H2. U.S. spending remains mixed, but we foresee progress in off-highway and commercial sectors.

4. Question: "What about the segments where you are seeing good demand in terms of SDV, AD AS, connected, hybrid?"

   Answer: Demand is strong in powertrain, connected, and autonomous areas. In Europe, while deals are ramping up slower than expected, we expect significant contributions from both India and China in the next six months.

5. Question: "With the introduction of AI into your business, how do you see your competitive advantage reflecting in attracting more clients?"

   Answer: Our focus on AI-infused mobility gives us a substantial edge in winning new business, as clients increasingly seek rapid solutions that drive efficiency and cost reductions in their programs.

6. Question: "Can you provide an update on the sodium-ion battery technology transfer to Trentar and its commercialization progress?"

   Answer: Trentar is making strong investments, including hiring a CEO to lead efforts in India. We expect the factory to stabilize in 2-3 years, after which revenue from licenses should kick in.

7. Question: "What strategies are you implementing in the China market?"

   Answer: In China, we engage with global OEMs and local Tier 1 suppliers, focusing on areas like digital cockpit technology and autonomous solutions, thereby enhancing our understanding of their unique innovations and requirements.

8. Question: "What are your thoughts on the direction of margins moving forward?"

   Answer: We believe we can maintain EBITDA margins at around 21% in the foreseeable future, barring significant currency fluctuations. In the medium term, we expect to increase margins through changes in our business model and client engagements.

9. Question: "How do you view the headcount strategy as growth is expected in the next quarters?"

   Answer: We prioritize hiring freshers skilled in AI. While we're managing headcount based on growth forecasts, we expect enhanced productivity through a shift to fixed-price projects that improve efficiency.

10. Question: "Can you provide guidance on revenue growth over the next few years?"

    Answer: We're not providing specific forecasts right now but will communicate guidance once market stability improves. However, we remain optimistic as we see strong pipeline opportunities in our key markets.