28 April 2014
4QFY14 Results Update | Sector:
Technology
KPIT Technologies
BSE SENSEX
22,632
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
6,761
KPIT IN
194.1
33.3/0.5
189/95
3/9/64
Financials & Valuation (INR Million)
Y/E Mar
Sales
EBITDA
PAT
EPS (INR)
EPS Gr. (%)
BV/Sh.
RoE (%)
RoCE (%)
P/E (x)
EV/EBITDA
2014E 2015E 2016E
26.9
4.2
2.4
12.6
19.0
64.1
20.5
27.7
13.7
7.4
30.9
5.0
3.1
15.4
22.4
79.5
21.4
27.9
11.2
5.9
35.8
6.0
3.8
19.2
24.9
98.7
21.5
28.0
8.9
4.3
CMP: INR172
TP: INR210
Buy
4QFY14 margin above estimate:
KPIT’s 4QFY14 revenues grew 3.6% QoQ to
USD113.6m, marginally ahead of our estimate of USD112.8m. EBITDA margin for
the quarter was 16.1%, +70bp QoQ, above our estimate of 15% (-40bp QoQ). PAT
(excluding exceptional item) was INR515m, below our estimate of INR583m, on
the back of higher forex loss (INR239m loss v/s est. of INR40m loss).
USD revenue guidance implies sustained 4Q traction:
For FY15, KPIT guided for
revenues between USD498-506m, implying growth of 12.1-13.9% YoY (v/s our
organic growth estimate was 13.7%). Guidance is for organic growth and excludes
revenues from purchase agreement with I-Cubed, which is yet to close, and adds
~USD10m in annual revenues. I-Cubed is a US based PLM focused company with
70+ employees and 13% EBITDA margin.
PAT guidance implies margin expansion:
PAT guidance for FY15 is INR2.94-3.00b,
implying growth of 18-21%. This compares with our organic PAT estimate of
INR3.01b. Guidance implies EBITDA margin of ~17%, compared to 15.7% in FY14.
Change in estimates:
Our USD revenue estimates for FY15/16 are up by 2%/2.2%,
as we factor numbers from I-Cubed acquisition from 2QFY15. Our margin
estimates are unchanged, and EPS estimates are changed by 1.3%/-0.9%, after
factoring lower other income owing to purchase consideration
Valuation View:
KPIT remains focused on select verticals, evidenced as the
company added strong ERP capabilities to its Engineering prowess by acquisitions.
We expect the company to grow its USD revenues at a CAGR of 16% over FY14-
16E and EPS at a CAGR of 24% during this period. Also, given limited likelihood of
any big ticket acquisition going forward, we expect Free cash flow generation to
improve going forward. Maintain
Buy.
Ashish Chopra
(Ashish.Chopra@MotilalOswal.com); +91 22 3982 5424
Siddharth Vora
(Siddharth.Vora@MotilalOswal.com); +91 22 3982 5585
Investors are advised to refer through disclosures made at the end of the Research Report.