KPIT Technologies Ltd. shares plunged as much as 16% as of 10 am in Wednesday's trade after the company warned of a weak first quarter, signalling its first quarterly revenue decline in nearly six years.
KPIT Tech hit its lowest level since September 19, 2022, while logging its biggest single-day decline in more than six years, the sharpest since March 18, 2020.
It is now down nearly 70% from its all-time high and about 50% over the last six months.
The company clarified in an exchange filing that the Q1FY27 revenue impact reflects multiple actions taken by clients in recent weeks. The company also expects Q2FY27 revenue to remain broadly in line with Q1FY27 levels, indicating weakness could persist through the first half of the fiscal year.
Why The Fall?
The engineering and automotive software company expects Q1 FY27 revenue of $176.2 million, down 4.7% sequentially and around 1% year-on-year. The guidance is also about 2.3% below analyst estimates of $180.4 million, ending a 23-quarter streak of sequential revenue growth.
KPIT attributed the weak outlook to an abrupt slowdown among European automotive OEMs, saying recent profit warnings and deteriorating business conditions at customers resulted in project delays that became apparent only in recent weeks.
The company also cautioned that EBITDA and net profit margins will contract in the June quarter, with profitability expected to decline by more than revenue because there is limited scope for cost optimisation over such a short period. This comes after KPIT had guided for an FY27 EBITDA margin of 20.5%-21.2%.
Management expects the first half of FY27 to remain challenging but reiterated that growth should improve in the second half, with stronger sequential momentum expected by the fourth quarter. It also maintained that demand for its products and solutions business remains healthy.
Following the update, JPMorgan downgraded the stock to 'Underweight' from 'Neutral' and slashed its target price to Rs 550 from Rs 700. The brokerage cut its FY27-29 revenue forecasts by 5-8% and earnings estimates by 9-22%, saying FY27 is likely to mark the company's second consecutive year of organic revenue decline.
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