KPIT Technologies (formerly KPIT Cummins Infosystems Ltd) is Indian Multinational Corporation with registered office in Pune, Maharashtra, India. Popularly known as KPIT, the company provides product engineering services and solutions, IT consulting services and technologies. Headquartered in Pune, India. Potential Catalysts Restructuring burden reduced. Company focusing on integrating the changes. Good addition of client Potential to improve of margins by 100bps Cash flow continues to grow inorganic way Recommendation With Superior project management skills, focus on measuring and monitoring quality and its planned expansion KPIT Technologies will be able to grow over the next few years. We recommend BUY on the stock at CMP of Rs. 134.50 to target of Rs 198 (Forward EPS of 15.32x FY17). Financial Summary Yearly Income Statement 2014 2015 2016 2017 E 2018 E Total Income 2698.52 3025.10 3249.06 3411.47 3710.36 EBIDTA 422.76 359.59 448.78 490.51 537.89 EBIT 368.81 274.46 379.65 405.22 446.99 Net Income 248.96 237.00 281.49 300.51 332.13 EPS (Unit Curr.) 12.61 12.00 14.25 15.22 16.82 EBIDTA Margin 15.69% 12.03% 13.92% 14.44% 14.56% EBIT Margin 13.69% 9.18% 11.77% 11.93% 12.10% PAT Margin 9.23% 7.83% 8.66% 8.81% 8.95% July 22 nd , 2016 KPIT Technologies Ltd Fundamental Report KEY PARAMETERS BSE 532400 NSE KPIT REUTERS KPIT.BO INCEPTION 1990 IPO 1999 INDUSTRY IT-SOFTWARE CMP (as on 22/7/2016) 134.50 Stock Beta 0.9593 52 Week H/L 98 -196.85 Market Cap (Cr) 3674.46 Equity Capital (cr) 39.50 Face Value (Rs) 2 Average Volume 1,94,89,392 Shareholding Pattern (%) Promoters 16.82 Non Institutions 83.18 Grand Total 100 Research Analyst: Vinay Gowda ATS Wealth Managers Pvt Ltd Email: [email protected]Phone: 080-43561171
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July 22nd, 2016 KPIT Technologies Ltd …research.adityatrading.com/Reports/KPIT Fundamental...Cummins Infosystems Ltd. It changed its name to "KPIT Technologies Limited" in September
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KPIT Technologies (formerly KPIT Cummins Infosystems Ltd) is Indian Multinational Corporation with registered office
in Pune, Maharashtra, India. Popularly known as KPIT, the company provides product engineering services and
solutions, IT consulting services and technologies. Headquartered in Pune, India.
Potential Catalysts
Restructuring burden reduced. Company focusing on integrating the changes.
Good addition of client
Potential to improve of margins by 100bps
Cash flow continues to grow inorganic way Recommendation
With Superior project management skills, focus on measuring and monitoring quality and its planned expansion KPIT
Technologies will be able to grow over the next few years. We recommend BUY on the stock at CMP of Rs. 134.50 to
target of Rs 198 (Forward EPS of 15.32x FY17).
Financial Summary
Yearly Income Statement 2014 2015 2016 2017 E 2018 E
Total Income 2698.52 3025.10 3249.06 3411.47 3710.36
EBIDTA 422.76 359.59 448.78 490.51 537.89
EBIT 368.81 274.46 379.65 405.22 446.99
Net Income 248.96 237.00 281.49 300.51 332.13
EPS (Unit Curr.) 12.61 12.00 14.25 15.22 16.82
EBIDTA Margin 15.69% 12.03% 13.92% 14.44% 14.56%
EBIT Margin 13.69% 9.18% 11.77% 11.93% 12.10%
PAT Margin 9.23% 7.83% 8.66% 8.81% 8.95%
July 22nd, 2016
KPIT Technologies Ltd Fundamental Report
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KEY PARAMETERS
BSE 532400
NSE KPIT
REUTERS KPIT.BO
INCEPTION 1990
IPO 1999
INDUSTRY IT-SOFTWARE
CMP (as on 22/7/2016)
134.50
Stock Beta 0.9593
52 Week H/L 98 -196.85
Market Cap (Cr) 3674.46
Equity Capital (cr) 39.50
Face Value (Rs) 2
Average Volume 1,94,89,392 Shareholding Pattern (%)
KPIT Technologies Limited is an India-based company engaged in providing software and information technology (IT)
enabled services globally. The principal businesses of the company are computer programming, consultancy and related
activities. It operates as product engineering and IT consulting partner for automotive, manufacturing, and energy and
utilities companies. It operates in the USA, UK & Europe and Rest of World segments. KPIT has a global extended product
lifecycle management (EPLM) practice, which offers consulting, platform based products, enterprise level analytics,
application management services (AMS) and enterprise cost management solutions. It offers technology solutions and
services and it partners with around 200 global corporations, including original equipment manufacturers (OEMs) and Tier
one companies.
Its subsidiaries include KPIT Infosystems Inc., KPIT Technologies (UK) Limited and KPIT Infosystems ME FZE.
KPIT was co-founded in 1990 by Ravi Pandit and Kishor Patil, as KPIT Infosystems. Both the co-founders are Chartered Accountants by profession & were partners in the Chartered Accountancy firm Kirtane and Pandit Chartered Accountants. KPIT launched its initial public offer (IPO) in 1999, which was 50 times oversubscribed. In 2002, Cummins InfoTech, the IT arm of Cummins Inc. merged with KPIT and the name of the Company became KPIT Cummins Infosystems Ltd. It changed its name to "KPIT Technologies Limited" in September 2013. This was in line with Cummins' decision to reduce its shareholding in KPIT to focus on its core business of engine and generator manufacturing. KPIT Technologies Ltd. key Products/Revenue Segments include
Software Development Charges which contributed Rs 1132.66 Cr to Sales Value (90.92% of Total Sales) Sale of Products which contributed Rs 86.26 Cr to Sales Value (6.92% of Total Sales) Others which contributed Rs 26.82 Cr to Sales Value (2.15% of Total Sales)
Average 166.12 1687.55 311.36 244.12 172.71 101.04 0.03 23.23 37.90
Financial Health
Management Effectiveness
CREDIT RATING
Total Bank Loan Facilities Rated Rs.4445.5 Million
Long Term Rating CRISIL AA-/Stable (Outlook revised from 'Negative' and rating reaffirmed)
Short Term Rating CRISIL A1+ (Reassigned)
CRISIL has its rating outlook on the long-term bank facilities of KPIT Technologies Ltd as 'Stable', while reaffirming the
rating from the previous at 'CRISIL AA-'. CRISIL has also assigned its 'CRISIL A1+' rating to the short-term bank loan
facilities.
CONCUSSION AND RECOMMENDATION
With Superior project management skills, focus on measuring and monitoring quality and its planned expansion KPIT
Technologies will be able to grow over the next few years. We recommend BUY on the stock at CMP of Rs. 134.50 to
target of Rs 198 (Forward EPS of 15.32x FY17).
RISKS AND CONCERNS
1. Currency And Hedging Risks KPIT derives more than 90% of its revenues in foreign currency and more than 50% of costs are in INR. Adverse cross currency movements can have a severe impact on the margins as well as profitability.
2. The slower than expected U.S growth trajectory and sluggish Euro zone growth will drag on external demand.
3. Brexit may have impact on KPIT's top line short term as well as long term. Pound depreciation by over 20% due to Brexit will have income reduction from UK and Europe geographical regions.
4. A disruptive increase in financial volatility could occur.
5. While financial market volatility remains very low from a historical perspective, anticipation of the interest rate
tightening cycle in the United States—the timing and speed of which is uncertain—could induce sharp movements
in term premiums and risk spreads in advanced and emerging market economies.
6. Slowdown in BFSI business, over the last six quarters, expected to continue. This will impact revenue as well as
margins.
FINANCIALS
For the quarter ended 30-Jun-2016, the company has reported a Consolidate sales of Rs. 803.24 Cr., down -4.46% from
last quarter Sales of Rs. 840.72 Cr. and up 5.92% from last year same quarter Sales of Rs. 758.32 Cr. Company has
reported net profit after tax of Rs. 55.05 Cr. in latest quarter.
The company has reported good set of numbers on YoY as well. In Q4FY15, accounts closure had led to weak set of
numbers for the quarter. However, the management’s focus on profitability, predictability, people and growth led to
improved profits for Q4FY16. In rupee terms, Net sales grew by 10.2% and came in at Rs 840.7cr in Q4FY16 vs. Rs
762.9cr in Q4FY15.EBITDAmargins improved by 1133bps and came in at 15.7% in Q4FY16 vs. 4.4% in Q4FY15. APAT
margins improved by 512 bps and came in at 11.7% in Q4FY16 vs 6.6% in Q4FY15.
Profitability
Growth
Yearly Income Statement 2012 2013 2014 2015 2016 2017 E 2018 E
Net Sales 1500.01 2238.63 2694.04 2989.92 3224.29 3396.47 3695.36
Other Income 23.87 -16.81 4.48 35.18 24.77 15.00 15.00
Other Operating Income 0 0 0 0 0 0 0
Total Income 1523.88 2221.82 2698.52 3025.10 3249.06 3411.47 3710.36
Total Expenditure 1283.44 1875.79 2275.76 2665.51 2800.28 2920.96 3172.46
- Short Term Loans & Advances 58.1 59.35 74.39 68.11 67.66
- Other Current Assets 16.36 82.31 72.69 103.24 90.67
TOTAL ASSETS 1328.05 1784.8 2144.9 2273.79 2195.22
Cash Flow Summary 2012 2013 2014 2015
Cash and Cash Equivalents at Beginning of the year 208 146.66 189.13 181.05
Net Cash from Operating Activities 100.45 120.35 102.98 289.41
Net Cash Used in Investing Activities -270.2 -349.86 -190.08 -102.1
Net Cash Used in Financing Activities 108.41 272.16 79.02 -40.34
Net Inc/(Dec) in Cash and Cash Equivalent -61.34 42.65 -8.08 146.97
Cash and Cash Equivalents at End of the year 146.66 189.31 181.05 328.02
Key Ratios 2012 2013 2014 2015
Debt-Equity Ratio 0.23 0.32 0.37 0.39
Long Term Debt-Equity Ratio 0.07 0.13 0.12 0.08
Current Ratio 1.54 1.43 1.45 1.49
Turnover Ratios
Fixed Assets 2.57 2.76 2.7 2.68
Inventory 0 0 1571.03 228.23
Debtors 4.5 4.95 4.72 4.38
Total Asset Turnover Ratio 1.75 1.83 1.67 1.65
Interest Cover Ratio 26.77 21.12 14.31 10.56
EBIDTM (%) 16.03 15.46 15.69 11.98
ROCE (%) 22.83 24.45 22.81 15.09
RONW (%) 21.49 23.02 21.29 18.43
Payout (%) 8.72 8.46 8.72 9.34
2012 2013 2014 2015
NP / PBT (X) 0.77 0.7 0.73 0.95
PBT / EBIT (X) 0.96 0.95 0.93 0.91
EBIT / Sales (X) 0.13 0.13 0.14 0.09
Sales / Assets (X) 1.75 1.83 1.67 1.64
Assets / Equity (X) 1.31 1.4 1.4 1.41
ROE (X) 0.22 0 0 0
Price Ratios
Current P/E Ratio 9.42
P/E Ratio 5-Year High 16.49
P/E Ratio 5-Year Low 4.84
Price/Sales Ratio 0.82
Price/Book Value 1.89
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this information assume all risks involved. The information provided herein is not to be constructed as an offer to buy or sell securities of any kind. ATS and/or its group
companies do not as assume any responsibility or liability resulting from the use of such information.