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Mar 22, 2012, 11.04 AM IST
PINC Research is bullish on KPIT Cummins and has recommended buy rating on the stock with a target of Rs 103 in its March 21, 2012 research report.
“KPIT Cummins has been witnessing increased demand traction in both Product Engineering and Business IT solutions. The company is expected to clock revenue CAGR of 20.2% during FY12-14E driven by 21.7% CAGR in Automotive Engineering Services Outsourcing during FY10-20E and increased adoption of SAP and Oracle by manufacturing industry. Higher offshoring of revenues as deals are ramped up, efficiency in software development costs through balancing of employee pyramid and integration of recent acquisitions should boost overall profitability leading to 21.3% CAGR in earnings.”
“Automotive engineering services outsourced to India are expected to have a CAGR of 21.7% during FY2010-20E thus growing from USD0.9bn to USD6.4 bn. Globally, OEMs have been making an increased amount of spending on automotive electronics to differentiate themselves by launch of vehicles with better fuel efficiency, improved passenger safety & comfort and newer infotainment features. Over the years, KPIT Cummins has very well complemented its organic growth with acquisitions and joint ventures. The company entered newer industry verticals such as Energy & Utilities and ramped up its service offerings like that in Oracle and SAP driven by these inorganic pursuits. The company has been able to grow the acquired entities manifold by leveraging the inherent synergies. KPIT Cummins has been making concerted efforts on innovating its technological and service offerings. The company spends around 3-4% of its revenues on R&D and has filed 39 patents so far in areas like power train, vehicle safety, infotainment, green technology and battery management. Going ahead, the company intends to monetize its intellectual property which would boost the operating margins.”
“We expect KPIT Cummins to clock revenue CAGR of 20.2% during FY12-14E. During the same period, PAT is expected to have a CAGR of 21.3% driven by operational efficiency improvement and higher offshoring. We initiate coverage on KPIT Cummins with a 'BUY' rating and a target price of Rs103 based on 10x PER multiple on 18-months forward earnings,” says PINC Research report.
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