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Jan 30, 2013, 05.57 PM IST | Source: Moneycontrol.com

Accumulate KPIT Cummins; target Rs 130: P Lilladher

Prabhudas Lilladher is bullish on KPIT Cummins Infosystems and has recommended accumulate rating on the stock with a target price of Rs 130 in its January 28, 2013 research report.

Prabhudas Lilladher is bullish on KPIT Cummins Infosystems and has recommended accumulate rating on the stock with a target price of Rs 130 in its January 28, 2013 research report.

"KPIT Cummins Infosystems reported muted revenue growth of 0% QoQ to US$103.5m (PLe: US$105m), whereas in INR terms, revenue declined by 0.7% QoQ to Rs5,633m (PLe: Rs5,732m, Cons: Rs5,444m). EBITDA margins eroded by 101bps QoQ to 15.6% (PLe: 16%, Cons: 16.2%) due to lower number of working days and realization dip. However, PAT grew by 9.3% QoQ to Rs504m (PLe: Rs554m, Cons: Rs521m) due to forex gain of Rs57m compared to loss of Rs214m in Q2FY13.

Management has retained its revenue guidance of 32-35% YoY to US$408-418m. However, supportive currency and strong cost management has helped the company to revise their PAT guidance upward by 16% to Rs1.96-2.00bn. The company has witnessed equity dilution due to preferential allotment (~4%) and ESOP conversion (2.5%). We also tweak our model to moderate our growth expectation for FY13 and FY14. Hence, we revise our EPS growth downward.

REVOLO and top client update: 1) The company is working on mass trial for REVOLO with ~40+ vehicles on the road with satisfactory performance 2) Top client Cummins declined 3% QoQ and likely to have challenges in terms of growth in H1CY13. We are cautious on IT budget for Cummins and its impact on overall revenue momentum as revenue dependence continues to be ~19%

KPIT has sustainably delivered revenue growth ahead of peers. However, equity dilution and weaker cash conversion remains a matter of concern. We reiterate our Accumulate rating, with a revised target price of Rs 130 (from Rs 140), 10x FY14E earnings estimate," says Prabhudas Lilladher research report.

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