Hold KPIT Cummins Infosystems; target Rs 190: Nirmal Bang

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Hold KPIT Cummins Infosystems; target Rs 190: Nirmal Bang

Nirmal Bang has recommended hold rating on KPIT Cummins Infosystems with a target price of Rs 190, in its January 27, 2012 research report.

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Nirmal Bang has recommended hold rating on KPIT Cummins Infosystems with a target price of Rs 190, in its January 27, 2012 research report.

"KPIT Cummins Infosystems reported good set of numbers and has revised guidance upwards for FY12E. For Q3FY12E, Dollar Revenues moved up 4.3% QoQ, Rupee revenues climbed up 16.6% QoQ and EBIDTA stretched 166 bps QoQ. Revenues in $ terms grew 4.3% QoQ, 21.6% YoY at $ 73.4 mn. This was supported by 4% volume growth QoQ and Price improvement of 70-80 bps.  In Rupee terms, revenues grew by 16.6% QoQ, 38.4% YoY at Rs.Rs.378.9 crores. The Top Client 'Cummins' contributed 24% of the revenues, while the contribution from the Top 10 clients has gone down by 2.7% QoQ. EBIDTA margins expanded 166 bps QoQ at 15.3%. The onsite revenues expanded (SAP business where margins are comparatively lower) 84 bps QoQ and kept the margins subdued as against the robust top line growth.  SAP business contributed 33.35% to the total revenues, increase by 274 bps QoQ. Company continues to hold a strong order book position in this business.  Net Profits rose by 21.7% QoQ at Rs.41.1 crs maintaining the margins at 11%. The company made forex gains of Rs.9.8 crores during the quarter."

"The company has upped its guidance for the full year i.e. FY12 from range of $275 mn - $285 mn given previously to $289 mn - $291 mn (excluding revenue from SYSTIME). It implies that the management expects revenue growth in the range of 2.3%-5% (in USD terms) in Q4FY12. SYSTIME's financials will be consolidated from Q4FY12E and will contribute around $13 mn-$14 mn to the revenue. Company had acquired 50% of Systime for Rs 104 crs and it would acquire the remaining 50% over the next 3 years for which it would have to pay ~Rs 150-200 crs. In the current Qtr, the company has acquired additional 7.5% in SYSTIME. In addition, the board has approved an investment of upto $25 million in the company's wholly-owned US-based subsidiary, KPIT Infosystems Inc, in the form of loan/equity in a phased manner."

"We are revising our numbers upwards for FY12E and FY13E factoring good growth the company showed in the current quarter. We have revised Revenues and PAT by 4.0% and 9.2% respectively for FY12E and by 3.4% and 0.1% respectively for FY13E. At CMP, the stock is trading 10.2x and 8.8x FY12E and FY13E expected earnings. We continue to maintain 'Hold' view on the stock with a target price of Rs.190," says Nirmal Bang research report.

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