#Kpit #Tech #Technica
KPIT Tech share price: Share of Pune-based KPIT Technologies surged on Thursday, extending gains to a third consecutive session, after Goldman Sachs maintained a target price of Rs 900 for the stock, this which implies a 50% upside potential.
Shares of Pune-based KPIT Technologies continued to rise for a third straight session on Thursday, brushing off overall market weakness that trails its global peers, boosted by its acquisitions of four companies from Germany’s Technica Group. Goldman Sachs maintained a ‘buy’ rating on KPIT with a target price of Rs 900 – implying upside potential of 50% from Wednesday’s closing price.
KPIT Tech shares jumped 8.4% to hit Rs 649.3 at the highest level of the day, taking its cumulative gain in three consecutive sessions to 13.6%.
According to the brokerage, Technica’s 2021 revenue and EBITDA are 16% and 17% of KPIT Tech’s for the fiscal year ending March 2022.
“The proposed acquisition could expand KPIT’s capabilities in ongoing changes to vehicle operating system architecture and strengthen competencies in self-driving cars, vehicle-anywhere connectivity, ADAS systems and d The transaction could also support KPIT’s positioning in automotive/cloud networking technologies where the company has sought to expand its expertise,” Goldman Sachs said.
KPIT Tech will pay a cash consideration of 80 million euros for the acquisition Technica Engineering, Technica Electronics Barcelona, Technica Engineering Spain and Technica Engineering. It will be will fully own Technica Group following the transaction, which is expected to be completed by the end of October.
The Pune-based company expects the transaction to be accretive to earnings per share at closing. He said the four companies are at the forefront of automotive production-ready system prototyping, automotive Ethernet products and validation tools.
According to Goldman Sachs, KPIT’s cash consideration for Technica involves 10 times intrinsic value to EBITDA. The intrinsic value/EBITDA ratio is a valuation multiple used to determine the fair market value of a company.
Technica’s revenue grew at an annualized rate of 24% from 2019 to 2021 compared to KPIT Tech’s growth forecast of 18 to 21% for the year ending March 2023, Goldman pointed out.
The brokerage will seek information on the following:
Shares of KPIT have returned almost 16% in the past month, a period in which the benchmark Nifty50 index gained around 0.5% and Nifty IT – whose 10 constituents include TCS, Infosys and Wipro – fell 8.8%.
India’s benchmark Sensex and Nifty50 stocks fell nearly 1% on Thursday amid weakness in financials and oil and gas stocks, although strength in FMCG stocks provided some support.
First post: STI
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