Flat Growth Despite Fresh Acquisition? Goldman Sachs Cuts Price Target For KPIT

With the earnings season just around the corner, Goldman Sachs has issued a cautious note on KPIT Ltd., notably trimming its 12-month target price from Rs 1,230 to Rs 1,100 while maintaining a 'neutral' stance.

The firm cites near-term softness and a slower ramp in newly acquired businesses as potential reasons to be cautious about the company.

Ahead of second-quarter earnings, Goldman Sachs also predicted KPIT's organic constant currency revenue to decline 2% sequentially. Revenues are also expected to fall 1% in dollar terms, weighed down further by the depreciation of the Indian rupee.

A bigger red flag, Goldman Sachs noted though, was the slow ramp-up of the newly-acquired company, Caresoft Global.

KPIT acquired Caresoft Global in mid-August, which was forecast to add about $4 million to additional revenue. Including this contribution, the brokerage firm believes KPIT could be poised to register flat revenue growth.

“Recently won business continues to take more time to burn into revenue,” the note said.

Keeping that in mind, Goldman Sachs has cut KPIT's FY26-28 earnings per share (EPS) by 16%, which comes on the back of uncertainty around deal closures and a delayed recovery in electric vehicle R&D.

As far as the road ahead is concerned, Goldman Sachs believes the revenue to show up only from the fourth quarter, believing that seasonal weakness could take place in the third quarter.

Shares of KPIT have gone through a sharp correction over the past 12 months or so, falling more than 33%. The stock price has fallen in each of the past four quarters.

Fifteen out of the 23 analysts tracking the company have a 'buy' rating on the stock, four recommend a 'hold' and four suggest a 'sell', according to Bloomberg data. The 12-month analysts' consensus target price on the stock is Rs 1,361, implying a upside of more than 24%.