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KPIT Cummins Infosystems Ltd. | Q1FY14 Result Update




IndiaNivesh Securities Pvt Ltd


24 Jul 2013





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KPIT Cummins Infosystems Ltd. | Q1FY14 Result Update Encouraging start...FY14 guidance on track; limited Upside potential: Downgraded to HOLD KPIT Cummins Infosystems Ltd (KPIT) Q1FY14 results was above our estimates on revenue and PAT front. However, EBITDA was slightly below our estimates due to full impact of wage-hike. Revenue in dollar term was 108.82 mn (+3.1% Q/Q) relative to INSPL expectations of $108 mn led by 0.6% of volume growth and 2.7% increase in the pricing. During the quarter, onsite revenue grew by 3.95% Q/Q (to $59 mn) whereas offshore revenue went up 2.54% Q/Q (to $50mn). Rupee revenue went up 7.6% Q/Q to Rs.6132 mn (INSPL est: Rs.5,994 mn). EBITDA stood at Rs.972mn (INSPL est. Rs.1093 mn), down 3.8% Q/Q due to full quarter impact of wage hike. As a result, EBITDA margin contracted 188 bps Q/Q to 15.9%. The company reported 47.3%/0.9% Q/Q growth in interest/depreciation to Rs62/Rs121mn (v/s Rs42.5/Rs120.1mn in Q4FY13). During the quarter, KPIT’s reported other income of Rs.59mn (v/s loss of Rs.86mn in Q4FY13). As a result, net profit went up 17.5% Q/Q to Rs.601 mn against Rs.511 mn in Q4FY13.The tax outgo during the quarter was Rs.246 mn leading to the tax rate of 29% v/s 27.1% in Q4FY13. Adjusting forex impact, net profit went down 9.2% Q/Q to Rs.542mn (v/s mn in Q4FY13). The current quarter performance is in line with the full year $-revenue [14-16% yoy to $465-475mn] and PAT [16-20% to Rs.2,309-2,388 mn] growth guidance. Valuation: At CMP of Rs.134, the stock is trading at 10.3x FY14E and 8.9x FY15E EPS estimate. We like the company’s current quarter performance on $-revenue front. 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. Further, turn-around in Cummins performance looks positive. However, due to limited upside potential from our current target price of Rs.145/share we downgrade our rating to HOLD from BUY.

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