KPIT Cummins - 1QFY2013 Result Update - Angel Broking

For 1QFY2013, KPIT Cummins Infosystems (KPIT) reported in-line results on the revenue front but exceeded expectations on the operating as well as profitability front. For FY2013, management has maintained its guidance of 32-35% yoy USD revenue guidance, which is 2.5x more than Nasscom's guidance of 11-14% and includes ~US$40mn inorganic revenue from Systime. We maintain our Neutral recommendation on the stock.

Quarterly highlights: For 1QFY2013, KPIT reported revenue of US$98mn, up 2.8% qoq. The company has carved out its semiconductor solutions (SSG) business (~2% to overall revenues in 4QFY2012) during 4QFY2012, so on like-to-like basis USD revenue grew by 5% qoq. In INR terms, revenue came in at Rs.538cr, up 12.1% qoq. The company's EBITDA margin declined by 75bp qoq to 15.1% due to negative impact of wage hikes given during 1QFY2013.

Outlook and valuation: KPIT's management has maintained its FY2013 USD revenue growth of whopping 32-35% yoy (US$408mn-418mn), which is the strongest amongst its peers, even on the back of strong 40% yoy revenue growth recorded in FY2012 because of the company's strengthening deal pipeline as well as incremental revenues from Systime. On the PAT front also, the company has maintained its guidance of 19-24% yoy growth to Rs.173cr-180cr. The company is growing ahead of other IT companies in terms of its revenue; and on the operational front, the company's performance has been improving since the last couple of quarters. Hence, we expect the company's revenue to post a CAGR of 20.4% and 24.7% in USD and INR terms, respectively, over FY2012-14E. On the EBITDA and PAT fronts, the company is expected to post a 25.6% and 21.7% CAGR over FY2012-14E. We value the company at 11x FY2014E EPS of Rs.11.2, which gives us a target price of Rs.124. We maintain our Neutral view on the stock.

Source : Equity Bulls

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