Cholamandalam Securities is bullish on KPIT Technologies has recommended buy rating on the stock with a target price of Rs 277 in its research report dated October 29, 2018.
Cholamandalam Securities' research report on KPIT Technologies
In 2QFY19, KPIT reported muted USD revenue growth of ~1.3% QoQ (2.9% QoQ in CC terms) to USD 153mn led by engineering, digital and product & platform divisions which grew by 10.4%/6.83%/40.37% QoQ respectively. Revenues in terms of INR stood at INR 10,789mn up by 6.4% QoQ aided by currency tailwinds. EBITDA margins expanded by 150 bps QoQ to 13.6% on account of INR depreciation (+120 bps) and business mix (+200bps), which was partially offset by wage hike (-220 bps).The management has upgraded its EBITDA margin guidance to 14% for FY19E from 11.5-12.5% earlier. PAT grew by 6% QoQ to INR 821mn on the back of healthy margins in spite of lower other income.
Enterprise Solutions would see better growth in the coming year. Post the steep correction of ~42% over the last 2 months, the stock is trading at a reasonable valuation of P/E of 12.9X/11x on FY19E/FY20E EPS, respectively. We arrive at a revised price target of INR 277 based on P/E of 14x FY20EPS and give a BUY rating on the stock.
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