Result Update: KPIT Technologies Ltd - NOT RATED - Kotak

KPIT delivered a strong revenue and operating performance. Revenue came at USD 150.5mn,0.2%/12% QoQ/YoY. Growth was led by PES (38.2% of revenue) and digital transformation which grew by 5.5% and 2.2% respectively.

Key Highlights

- KPIT's revenue grew by 0.2% sequentially to USD 150.5mn in line with our estimates. Margins at 12.1% was too in line with our estimates. Notably adjusting for cost relating to merger and demerger with BirlaSoft, EBITDA margin would have been higher by ~110bps.

- Revenue growth was backed by Product Engineering and Digital Transformation. Product growth has inherently remained a lumpy business and reported a de growth of 41% sequentially. IT services too was sluggish largely due to SAP which reported a de growth of 3.5% QoQ.

- The KPIT - Birlasoft merger demerger is on track and has received the approval from the CCI and has filed the scheme with NCLT. Almost all regulatory requirements for the mandatory open offer have been fulfilled. The transactions are likely to be completed this year.

Valuation & outlook

- We are positive on merger and demerger plan with Birlasoft. Current valuations capture recovery in margins and revenue growth expected from Birlasoft, based on numbers shared at time of the demerger announcement. We believe further upside will depend on traction in Birlasoft which we do not know at this point. Birlasoft will be about one third size of the combined entity post the merger demerger scheme, so due to inadequate information about Birlasoft we restrict rating on the stock.

Shares of KPIT Technologies Limited was last trading in BSE at Rs.298.45 as compared to the previous close of Rs. 287.25. The total number of shares traded during the day was 160008 in over 1886 trades.

The stock hit an intraday high of Rs. 301.4 and intraday low of 285.7. The net turnover during the day was Rs. 47422916.

Source : Equity Bulls

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