Speaking from the sidelines of an investor conference held by Antique Stock Broking, KPIT Technologies senior VP and corporate finance head Anil K Patwardhan told CNBC-TV18’s Anuj Singhal and Reema Tendulkar the company was confident of meeting the USD 498 million revenue forecast it had laid out earlier for the full fiscal year.
Antique AVP – Research Ashish Aggarwal said the brokerage was bullish on KPIT, as well as on some other midcap IT names such as Cyient and NIIT Technologies.
Below is the transcript of the interview on CNBC-TV18.
Anuj: What is your call on the stock of KPIT Tech at this point in time?
Aggarwal: We have a buy rating on KPIT Technologies with a price target of Rs 250 and we are actually bullish on the company given the growth rate, which we are seeing in the automotive segment as well as because of the margin improvement through the SAP SPAU which we have seen. So, that is why we are positive on the company.
Reema: Last night, Cognizant came out with their guidance for CY15. They were expecting it to be better compared to the previous year including on currency as well; 19 percent versus 16 percent that they delivered in CY14. What is the outlook looking for KPIT Technology for FY16, will it be better than FY15 and what are the early signs?
Patwardhan: The way we are approaching the close of this year as well as the next year is we are reaching this half billion mark [in revenues] end of this year. So, the guidance which we have given is Rs 498 crore plus and that is what we would like to achieve when we will close FY15.
FY16 will certainly continue to drive the organic growth of the company. We have three verticals on which we have a very sharp focus. So we see better opportunities for us in automotive and transportation vertical we see reasonable opportunities for us in the other segment of our business where we give Oracle and JD Edwards solutions and the third area where we focus is in the SAP business.
So, my sense is that we will drive better growth in automotive, which is 18 percent plus. We will drive sort of reasonable growth in Oracle and JD Edwards practice, which will be like 12-14 percent of our revenues and in SAP our focus is more on the margin. So, we will drive around five percent growth this business.
Reema: You have already guided for your margins in SAP to hit double digits in Q4. In FY16 how much further can you improve the margins in SAP?
Patwardhan: Our objective is to sustain SAP margins in, say, closer to double digit in FY16. That will be the focus of the company.
Reema: So, in the 10-15 percent bracket when you mean double digit?
Patwardhan: Double digit meaning 10-12 percent.
Reema: How do things currently stand in terms of client budgets? Do you have the confidence to say that next year will be better than this year for you?
Patwardhan: The way we approach the next year, of course we will come to you with a set of numbers at the beginning of the financial year but I have already indicated in three different businesses what growth opportunities we see for ourselves. That is the way we would like to drive. We have over the period created a set of strategic customers.
So, we have almost 50 such customers who are existing strategic customer or potentially who can become strategic customers for us and we would like to go deeper into these customer accounts based on our offerings on business IT side on one hand and the engineering services on the other hand. Engineering services are our core expertise and we would like combine our offerings on both the domains and go deeper into these customers. That will be the growth driver for us going forward over next two to three years.
Reema: You look at a lot of midcap IT companies. Which ones would you recommend at current levels?
Aggarwal: We have a positive stance on Cyient apart from KPIT. Also, we like NIIT Technologies. We have a price target of around Rs 450 on NIIT Technologies and Cyient. We are positive on the engineering services space. So, that is where KPIT and Cyient clearly stand out.
Reema: You very specifically spoke about organic revenues, are you looking at any inorganic moves in FY16?
Patwardhan: No, we actually don’t put any timelines or the revenue numbers for any inorganic growth. Over the years we have always been looking to improve our offerings and customer relationship through organic as well as inorganic growth.
So what I mean here is we will continue to look at the opportunities to improve our offerings because the way we look at inorganic growth unless it fits into our overall strategy we will not get into these deeds. So we don’t put timelines or numbers for that.
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