KPIT Cummins Slows Down But Prospects Remain Bright

KPIT Cummins announced its Q1FY13 post market hours on July 25, 2012. The results have not been in sync with investor expectations and the stock prices of the company have been tanking today with lows reaching as much as 4 per cent. The company has posted a sequential increase of 2.80 per cent in revenue in dollar terms. For Q1FY13, the revenue stands at USD 98.05 million as against USD 95.38 million for Q4FY12. As compared to the growth shown by the company from FY11 to FY12, which helped the company gain investor fancy, the QoQ growth figures have been moderate.

In FY12, the company’s revenue stood at USD 309.29 million which is a growth of 43.08 per cent compared to the revenue of USD 216.17 million in FY11. This marks a significant reduction in dollar topline growth thus causing disappointment among investors. In rupee terms, the company, like every other IT firm in India, benefited due to depreciation of the rupee. The topline of KPIT Cummins grew by 12.14 per cent from Rs 480 crore in Q4FY12 to Rs 538.265 crore in Q1FY13. The company saw some moderation in the EBITDA due to a hike in salaries. The net profit was reported at Rs 51.28 crore for Q1FY13, which is 17.31 per cent higher than Rs 43.715 crore reported in Q4FY12. 

Financials For Q1FY13 And Q4FY12

 Financials For FY12 And FY11

In terms of geography, verticals and services offered, there was no drastic change seen in the revenue mix of any. KPIT Cummins has been focused on automotive, manufacturing and energy & utilities industries, which has been giving it sector-specific expertise and leverage in terms of concentration of investment and growth.

The appreciation in stock prices that the company’s operations caused has been high for this year with the stock giving YTD returns of 66.12 per cent. We maintain our positive outlook for mid-cap IT companies and expect them to outperform bigger firms in the industry due to disintegration of big projects and due to multi-sourcing of deals. At the same time, having looked at the capital appreciation so far, we recommend extreme caution and a watchful eye while investing in these stocks.