03/05/2013

Buy KPIT Cummins Infosystems Ltd For Target Rs.130

KPIT Cummins Infosystems (KPIT) reported Q4FY13 results below our expectations but ahead of consensus expectation. The company has given a revenue guidance of 14-16% in USD terms & a PAT guidance of ~16-20% YoY in INR terms for FY14. We
reiterate ‘Accumulate’, retain our TP of Rs13
.* Revenue growth and margin surprise, despite sharp decline in Cummins’ revenue: KPIT reported a softer than expected revenue growth of 2% QoQ to US$105.5m (PLe: US$106.6m), whereas in INR terms, revenue grew by 1.2% QoQ to Rs5,699m (PLe: Rs5,780m, Cons: Rs5,541m). EBITDA margins expanded by 217bps QoQ to 17.8% (PLe: 15.9%, Cons: 16.4%) due to the change in business mix with the share of Auto Engineering & IES of total revenues going up. However, PAT remained flattish at Rs511.7m (PLe: Rs520m, Cons: Rs518m)
* Guidance strong – What does it factor?: The company has given US$ revenue growth guidance of 14‐16% YoY, that factors in revenue CQGR of 4.2‐4.9% in FY14. We don’t see environment supporting such a strong growth. The company compulsorily has to take inorganic route to achieve its guidance. However, PAT guidance of 16-20% YoY assumes ~80-150bp EBITDA margin erosion in FY14. The implied margin erosion on QoQ basis is ~50‐90bp as the company exited Q4FY13 at an EBITDA margin of 17.8%. * Other Highlights: 1) For FY13 A&E recorded an EBITDA of ~24-25%, IES recorded an EBITDA of ~17-18% 2) SYSTIME revenues grew by 9.3% QoQ to $19.9m 3)Hedge: $69.76m @ Rs52.07 maturing in FY14 4) Q4FY13 Capex: Rs179.2m
* Top client update ‐ Weakness in top client persists: Revenue from Cummins declined by 11.5% QoQ (Q3FY13: -3% QoQ). The company expects weakness in top client to prevail in H1CY13 & pick up in business momentum thereafter. We are cautious on IT budget for Cummins and its impact on overall revenue momentum as revenue dependence continues to be ~17%.
* Valuation and Recommendation: KPIT has sustainably delivered revenue growth ahead of peers with stable margin. We reiterate our ‘Accumulate’rating, with a target price of Rs130, 10x FY14E earnings estimate.

TTK HEALTHCARE

(BSE TICKER-507747@Rs.450/-)

TARGET

Rs.550/- Rs.700/-

Buy Maruti Suzuk Ltd. For Target Rs.1849.00

Maruti Suzuki is India’s largest passenger vehicle company with a market share close to 40% which offers 14 models with over 200 variants across the Industry segments like: Passenger cars, Utility vehicles and Vans.
* The Company has posted a net profit of Rs. 12396.20 million for the quarter ended Mar. 31, 2013 as compared to Rs. 6398.40 million for the quarter ended Mar. 31, 2012.
* Total Income has increased from Rs. 364139.50 million for the quarter ended March 31, 2013 to Rs. 444003.00 million for the quarter ended March 31, 2012.
* Maruti Suzuki India Ltd sold a total of 119,937 units in March 2013.This includes 12,047 units of exports.
* Maruti Suzuki Ltd recommended a dividend of 160 per cent (Rs 8/- per share of face value Rs. 5/) for 2012-13.
* Maruti Suzuki India Limited unveiled the SX4 in an all new form including fresh look exteriors & interiors, enhanced performance, and more onvenience.
* Net Sales and Operating Profit of the company are expected to grow at a CAGR of 16% and 30% over 2012 to 2015E respectively.
* Maruti Suzuki’s bestseller Swift Dzire and Ertiga have been awarded the prestigious India Design Mark: Good Design Award.

Investment Highlights STANDALONE
Results updates- Q4 FY13,
Maruti Suzuki is India’s largest passenger vehicle company with a market share close to 40% which offers 14 models with over 200 variants across the Industry segments like: Passenger cars, Utility vehicles and Vans, reported its financial results for the quarter ended 31 MAR, 2013.
The company’s net profit jumps to Rs.12396.20 million against Rs.6398.40 million in the corresponding quarter ending of previous year, an increase of 93.74%. Revenue for the quarter rose 13.45% to Rs.133040.10 million from Rs.117270.10 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.41.04 a share during the quarter, registering 85.30% increase over previous year period. Profit before interest, depreciation and tax is Rs.23986.00 millions as against Rs.11553.50 millions in the corresponding period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.1688.80, the stock P/E ratio is at 16.78 x FY14E and 14.35 x FY15E respectively.
* Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.100.66 and Rs.117.73 respectively.
* Net Sales and Operating Profit of the company are expected to grow at a CAGR of 16% and 30% over 2012 to 2015E espectively.
* On the basis of EV/EBITDA, the stock trades at 8.01 x for FY14E and 6.84 x for FY15E.
* Price to Book Value of the stock is expected to be at 2.35 x and 2.03 x respectively for FY14E and FY15E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.1849.00 for Medium to Long term investment.