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KPIT Cummins Infosystems Ltd. | Performance Mixed bag




IndiaNivesh Securities Pvt Ltd


30 Apr 2013





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KPIT Cummins Infosystems Ltd. | Performance Mixed bag; FY14 $-rev guidance ahead of industry estimate: Maintain BUY Q4FY13 Results Highlights: KPIT Cummins Infosystems Ltd (KPIT) Q4FY13 results was mixed-bag, EBITDA above our estimate [but revenue & PAT below INSPL est]. Revenue in dollar term was $105.5 mn (+2.0% qoq) relative to INSPL expectations of $106 mn due to negative cross currency movement. During the quarter, onsite revenue grew by 0.35% qoq (to $57 mn) whereas offshore revenue went up 3.97% qoq (to $49mn). Rupee revenue went up 1.2% qoq to Rs.5,699 mn (INSPL est: Rs.5,738 mn). EBITDA stood at Rs.1,011mn (INSPL est. Rs.918 mn), up 14.6% qoq due to lower operating expenditure and change in the business mix [higher revenue from Auto & Eng segment]. As a result, EBITDA margin expanded 207 bps qoq to 17.7%. The company reported 2.3%/2.5% qoq growth in interest/depreciation to Rs42/Rs121mn (v/s Rs42/Rs118mn in Q3FY13). During the quarter, KPIT reported other loss of Rs.86mn (v/s income of Rs.77mn in Q3FY13). As a result, net profit inched up marginally to 1.4% qoq to Rs.512 mn against Rs.504 mn in Q3FY13. The tax outgo during the quarter was Rs.207 mn leading to the tax rate of 27.1% v/s 22.8% in Q3FY13. Increase in the tax rate was due to higher offshore revenue contribution. Adjusting other loss, net profit went up 39.7% qoq to Rs.597 mn (v/s Rs.427 mn in Q3FY13). In FY14 management guided $-revenue growth of 14-16% yoy [to $465-475mn] with PAT growth of 16-20% [to Rs.2,309-2,388 mn]. Valuation: At CMP of Rs.98, the stock is trading at 7.6x FY14E and 6.4x FY15E EPS estimate. We like the company’s strong $-revenue growth guidance along with stable PAT margin expectation. Additionally, strong deal pipeline in manufacturing, integrated engineering solutions (IES) and auto electronics space looks positive. The strong cross-selling opportunity and increased service offerings with acquisition of SYSTIME, JDE, and CPG remains key growth driver. However, underperformance of Cummins remains the key revenue risk. We maintain BUY with target price of Rs.145 [valuing 9.5x FY15E], excluding revenue from REVOLO.

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