Accumulate KPIT Cummins; tgt Rs 140: PLilladher

Prabhudas Lilladher's report on KPIT Cummins Infosystems

"KPIT Cummins Infosystems reported an expected revenue growth of 3.1 percent QoQ to US$108.8m (PLe: US$108.9m), whereas in INR terms, revenue grew by 7.6 percent QoQ to Rs6,132m (PLe: Rs6,078m, Cons: Rs6,094m). EBITDA margins dipped by 202bps QoQ to 15.8 percent (PLe: 17 percent, Cons: 16.6 percent) due to wage hike, visa costs & milestone-based discounts to select customers. However, PAT grew by 17.5 percent QoQ to Rs601.3m (PLe: Rs649m, Cons: Rs595m)."

"KPIT has given USD revenue growth guidance of 14-16 percent YoY, which factors in revenue CQGR of 4.9-6.0 percent in FY14 for the remaining three quarters. We remain cautious of the revenue guidance as the current environment is not conducive for such kind of growth, especially on the upper end of the guidance."

Valuation and Recommendation: "KPIT has demonstrated growth leadership among peers. However, the current guidance factors in stronger than environment supported growth. We revise our estimates for FY14 and FY15. We reiterate our 'Accumulate' rating, with a revised target price of Rs140 (Old: Rs130), 10x FY14E earnings estimate," says Prabhudas Lilladher research report.

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