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KPIT Technologies Limited A Small-Cap Multi-bagger?

KPIT Technologies Limited A Small-Cap Multi-bagger?

Published on 21 June 2021

Can KPIT Tech be a small-cap multi-bagger stock? Recently, the Head of KPIT Technologies, Mr. Kishor Patil has issued some statements regarding the opportunities and challenges lying ahead for the company. Let's understand more and decode these statements by the Company Head of KPIT Tech as we go ahead with the article.

Introduction:

Mr. Kishor Patil, head of KPIT Tech. has issued some statements and an article was also published in Economic Times which will be going to discuss further. We will discuss the challenges, risks, and opportunities available for KPIT Tech.

The statement says that "KPIT Tech. understands software better than the Auto Companies and  Auto Industries better than other software companies”. The company has laid complete focus on the Auto industries. In 2018, the company had a merger with Birlasolft which will be looking at the IT industry and KPIT will focus on Auto Industry.

Comparison with other IT companies:

  • KPIT Technologies is a software integrator and is playing this role very well.
  • The focus of other IT players is not only on the Auto sector, their majority focus is situated on the service sector.
  • The spend on R&D by other companies is very less due to the high focus on Service Sector which differentiates KPIT Tech. from others. The company spends a good amount on R&D and always tries to take the first-mover advantage in the market.
  • The other players work on scale, whereas, KPIT Tech. work on their capability. Among the world's top 15 players in the auto industry, 12 are the clients of KPIT Tech.

Challenges:

  • The major challenge faced by the company is the introduction of Electric Vehicles which will make the Auto Companies build in-house R&D services. This will not happen suddenly but it is surely a possibility.
  • The other IT players like TCS, Infosys, Accenture, etc. also have a focus on the Auto industry and KPIT Tech. will face huge competition. These companies are also making acquisitions to get a hold of this segment.

Opportunities:

  • The company has a huge untapped electric vehicle and automation market throughout the world.
  • The company can also become the target for acquisition by the big players in the coming years due to very high earnings visibility.

Conclusion:

The statement from the head of the company is very positive and the market has also appreciated the words. Even being a small company it has huge potential to compete with the big players in this niche segment. The dealing with the Top-12 Clients of the World shows great earning visibility of the company. R&D Spending of the company and its total focus towards the auto sector is an important thing to look out for in this company.

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