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You are here : IndiaNotes >> Research & Analysis >> Companies >> KPIT Technologies Ltd. >> Research

KPIT Technologies Q3FY17: Nirmal Bang revise target with a HOLD recommendation

Nirmal Bang | 27 Jan, 2017  | Follow Author | Add to my Favourites 
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KPIT Technologies Ltd.


CMP: Rs. 138


Target: 146


Recommendation: HOLD

 

KPIT reported weak results for the quarter. USD ($) Revenue de grew by 0.45%, to 122.8 mn in Q3FY17 vs 123.4 mn in Q2FY17. KPIT has divested its functional safety product business during the quarter resulting in to a revenue loss of $0.5mn for 2 months. Although, dollar revenue slightly de grew, however, Net sales in Rupee term remained flat 0.1% and came in at Rs 830.7cr in Q3FY17 vs. Rs 829.5cr in Q2FY17. Growth in sales was not sustainable at operational profit mainly due to increase in employee expenses. Employee expenses increased to 63.9% in Q3FY17 vs. 61.8% in Q2FY17. Ebitda margins depressed by 84bps and came in at 10.2% in Q3FY17 vs. 11% in Q2FY17.Lower Ebitda margin led to lower PAT margins.  PAT margins depressed by 55 bps and came in at 6.2% in Q3FY17 vs 6.8% in Q2FY17. Digital revenue contributed 25% to the total revenue.

 

Valuation and Outlook


Going forward, inorganic growth (Micro Fuzzy acquisitions) accompanied with acquisition and mining of accounts may lead to growth to the company. Better employee pyramid, with minimal lateral hiring in the near-term, will lead to improvement on the operational margins of the company. At CMP, the stock is trading at 11.8/10.8/9.4x its FY17E/FY18E/FY19E earnings. We recommend HOLD with a revised target price of Rs.146(10x FY19E EPS).



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About Nirmal Bang

Founded in 1986 by Nirmal Bang, the Nirmal Bang is recognized as one of the largest retail broking houses in India, providing an array of financial products and services. Their retail and institutional clients have access to products such as equities, derivatives, commodities, currency derivatives, mutual funds, IPOs, insurance, depository services and PMS. The Group is headed by Mr. Dilip Bang and Mr. Kishore Bang.


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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.




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