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KPIT Q3FY14 results update

January 24, 2014, Friday, 04:49 GMT | 23:49 EST | 10:19 IST | 12:49 SGT
Contributed by Nirmal Bang


KPIT Q3FY14 numbers were below our expectations mainly because of client furloughs, delays in deal closure and structural changes in SAP division. EBIDTA margins remained flat QoQ at 15.3% on the back of higher offshore work. 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. However, due to dismal current quarter performance company has cut its FY14 guidance from earlier 14-16% to around 10% but is confident of delivering better growth in FY15. Our earlier target of Rs.162 had got achieved on 18th Dec 2013 and we had recommended investors to book partial profits. Post the current results, the stock has fallen sharply and we recommend investors to Hold and Buy the stock on dips as outlook continues to be positive in the long run.
 
- USD Revenues for Q3FY14 de-grew by 2.3% QoQ at USD 110 mn. Company made structural changes in SAP business like moving to Annuity projects, shifted some business offshore during the quarter. It also has aligned sales team in the Automotive segment as part of the overall verticalisation process.
 
- EBIDTA margins remained flattish QoQ at 15.3% during the quarter.
 
- Company incurred Rs.3 crore forex loss in the current quarter against a loss of Rs. 1.4 crore in the preceding quarter.
 
- Adjusted PAT for the quarter was down 7% qoq at Rs.63 crore.
 
 
Other Highlights:
 
- Top Client Cummins has grown by 4.7% QoQ and now contributes 17.9% to revenues.
 
- Company has added 3 clients during the quarter taking the total active clients to 195.
 
 
Concall Details:
 
- Company has faced challenges for growth in the SAP SBU, where on YTD basis there has been a decline of around 14%.
 
- Looking forward, with a healthy order book and operational efficiency measures already in place for SAP SBU, management expects to get back to growth and positive operating margins in FY15 for SAP division which contributes ~ 24% to topline.

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