KPIT Technologies (KPITTECH IN) – Q2FY26 Result Update – Inline Q2, Deal ramp-ups and easing macro to drive H2 performance – BUY

The operating performance (+0.3% QoQ CC) was fairly in line with our estimates that include USD 2.5% QoQ inorganic growth from 2-month consolidation of Caresoft. The organic USD revenue de-growth translates to 2.3% QoQ, which is primarily driven by softness in PV segment, middleware services and weakness in US/Japan regions. Part of these impacts are attributed to spending that the clients have deprioritized, and discontinued programs which are non-strategic in nature, while the other part is being cannibalized with AI-led products and solutions. The efforts are in place to compensate the slowdown in part of the operations with additional scope of offering and exploring adjacencies that require similar discipline and skillset. The quarter witnessed a large strategic deal (three-year) with a Europe automotive OEM that will partly support Q3 growth before it achieves its full potential in Q4. Additionally, the revenue derived through JV (Qorix) is sporadic in nature and reported one-time loss (INR 60m) in Q2. We are adjusting FY26E/FY27E/FY28E revenue growth and margin on account of continued slowdown in PV, especially in the US region that is hinting a staggard recovery instead of sharp uptick. EPS adjustment is primarily attributed to higher depreciation and slower turnaround of JV than anticipated. We are assigning 33x PE to Sep. 27E earnings, translating a TP of 1,380. Maintain “BUY”.