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KPIT Cummins Infosystems Q2FY14 results update

January 6, 2014, Monday, 13:08 GMT | 08:08 EST | 17:38 IST | 20:08 SGT
Contributed by Nirmal Bang


KPIT reported mixed set of numbers; wherein revenues were above our expectations growing 15% QoQ to Rs.703 crore. However, EBIDTA margins dipped by 37 bps QoQ at 15.4% and below our expectations. Management has planned an organizational re-structuring wherein the company has adopted a verticalised and go to market approach to fuel growth in the coming years. In cognizance of this, company has also made top level hiring and is now chasing larger deals. At CMP, the stock is trading at 9.6x/8.7x its FY14E/FY15E expected earnings. We recommend investors to Hold and Buy it on dips as outlook continues to be positive.
 
- USD Revenues for Q2FY14 grew by 3.1% QoQ at USD 112.2 mn. APAC and Europe regions saw good growth while US saw a marginal de-growth due to billing fluctuations and is expected to get stable in the coming quarters.
 
- EBIDTA margins fell by 37 bps QoQ to 15.4% on the back of provisions of Rs.12 crore and investments like Rs.8 crore in employee training and events. Additional Rs.3.5 crore was also spent on net employee additions during the quarter. These additional expenses mitigated the currency benefits of ~ 250 bps.
 
- Company incurred Rs.1.4 crore forex loss in the current quarter against a loss of Rs. 12.2 crore in the preceding quarter.
 
- Adjusted PAT for the quarter was flat QoQ to Rs.68 crore.
 
 
Other Highlights:
 
- Top Client Cummins has grown by 13% QoQ and now contributes 16.5% to revenues. Top 5 and 10 customers have grown by 12.9% and 12.2% QoQ respectively.
 
- Company has added 3 clients during the quarter taking the total active clients to 192.
 
- Blended Utilization for the quarter stood at 83% against 83.8% in the previous quarter.
 
- Constant currency growth was of 4% QoQ during the quarter.
 
 
Concall Details:
 
- Management has maintained its earlier guidance of 14-16% growth and would revise it in Q3FY14. There has been delay in closure of some of the deals; however pipeline is strong.
 
- Onetime costs incurred in the current quarter may not occur in the coming quarters.