KPIT Cummins Infosystems Ltd (KPIT) is a leading technology solutions partner for global manufacturing corporations and operates through its three SBUs namely Integrated Enterprise Solutions (IES), Automotive & Engineering (A&E), and SAP. Through its industry vertical focused approach KPIT provides innovative technology solution to 178 global companies in specific areas of automotive (60+), energy & utilities (15+), manufacturing (70+) and semiconductor manufactures (8+). Over the years, KPIT has achived significant milestone in R&D and has filed 43 patents in the Automotive and semiconductor domains, while it has been granted 2 US patents filed in hybrid technology and VLSI domain.
Strong financial performance driven by acquisitions in niche segments
KPIT has delivered strong financial performance during last five years (FY07-12) with Revenue & Profit CAGR of 26% & 22% respectively, while in 9MFY13 it delivered 64% growth in Revenue and 45% growth in Net profits. Its strong gowth can chiefly be attributed to its acquisition strategy with focus on companies having strong domain expertise in niche areas of Automotive, SAP, Oracle, Business Intelligence (BI) etc. the major acquisations include CG Smith Software (2006), Sparta Consulting (2009), CPG Solutions (2010) and SYSTIME (2011). The acquisation of CG Smith strengthens KPIT's position & Capabilitiesin the automotive electronic market, while the US based Sparta consulting which offers ERP & BI solutions, has strengthened its SAP SBU and presence in US market in Energy & Utilities space. The acquisation of CPG (an Oracle Gold Partner) & SYSTIME (the largest JDE solutions provider) has been strategic in terms of IES SBU growth, and has helped KPIT strengthen its Oracle services portfolio and positioning in global ERP roll outs. Going forward, with its niche vertical focused and acquisition led growth approach, KPIT targets to achieve a billion dollar Revenue by FY2017 with about 18% EBTDA margins.
Technical Analysis and Valuation
Considering KPIT's decent growth visibility, the strong positioning across the service line and verticals, I have valued the company at 10x its FY 14E EPS and initiate coverage on the stock with a "BUY"Rating and target price of Rs.135 - 140. Technically, Buy the stock below 100 with strict STOPLOSS AROUND 65. You may add more above 70 if it rest around 70.
Considering KPIT's decent growth visibility, the strong positioning across the service line and verticals, I have valued the company at 10x its FY 14E EPS and initiate coverage on the stock with a "BUY"Rating and target price of Rs.135 - 140. Technically, Buy the stock below 100 with strict STOPLOSS AROUND 65. You may add more above 70 if it rest around 70.
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