Shares of Tata Elxsi tumbled as much as 7% to their day’s low of Rs 3,558 on the BSE on Wednesday after competitor KPIT Tech issued a preliminary business update indicating that its financial performance for the first quarter of FY27 will fall short of earlier expectations following a sudden drop in revenue in recent weeks.
The company said it expects its Q1FY27 reported revenue in U.S. dollar terms to decline by around 1% year-on-year compared with Q1FY26. The decline has been primarily attributed to sudden actions by some European original equipment manufacturers (OEMs) following their recent profit warnings and adverse business outlook.
Also read: Why KPIT Tech shares crashed today: The BMW & Volkswagen connection explained
KPIT Technologies and Tata Elxsi are peers in the automotive technology space, developing software and engineering solutions for global automakers and Tier-1 suppliers. Both focus on next-generation mobility technologies, including software-defined vehicles, autonomous driving (ADAS), connected vehicles, electric vehicles, and vehicle electronics and embedded software.
Source of trouble
JPMorgan, which downgraded the stock, connected the dots directly by saying the update largely reflects an earlier profit warning tied to KPIT's BMW account, compounded by troubles at Volkswagen. BMW is significant to KPIT's business; the brokerage noted it is its largest client, representing 12% of revenues.
The global brokerage downgraded KPIT to Underweight and slashed its target price to Rs 550 from Rs 700. The brokerage estimated the $ revenue decline implies a steeper 4% quarter-on-quarter drop in constant currency terms, driven by the European OEMs' sudden pullback.
It also cut revenue estimates by 5–8% and margin estimates by 20–270 basis points across FY27–29, translating into EPS cuts of 9–22%, while trimming its target price-to-earnings multiple to 17x from 21x. JPMorgan now expects FY27 to mark a second straight year of organic revenue decline, projecting a 2.6% drop versus a 1.4% decline in FY26.
JM Financial also downgraded the stock, moving to REDUCE from ADD. The brokerage cut its FY28–29 earnings estimates by 12–13% and lowered its target multiple to 20x FY28E EPS from 24x, citing a muted near-term outlook. JM Financial said the update pushes KPIT's recovery timeline further out and that FY27 is likely to be a soft year overall, even as it acknowledged that longer-term client cost pressures could eventually benefit KPIT through higher outsourcing. The brokerage flagged that earnings estimates remain vulnerable to further downgrades.
Read more: KPIT Tech shares crash 17% as company expects Q1 revenue decline, sharp hit to margins
Despite the warning, KPIT maintained that its underlying business remains strong. The company pointed to continued momentum in its products and solutions business, the trucks and off-highway segment, and markets including the US, Korea and India, along with new client wins in passenger vehicles.
It said it is pursuing AI-led productivity and cost-containment measures and remains confident of delivering sequential growth by Q4FY27, setting up a stronger FY28. Both H1FY27 and FY27 as a whole, however, are expected to fall short of earlier expectations.
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