KPIT Cummins Ups Profit Guidance For FY13

KPIT Cummins announced its Q3FY13 results yesterday. The result was largely neutral considering flat revenues and a reduction in EBITDA margins on one hand and upward revision of profit guidance for FY13 on the other.

Revenues for KPIT Cummins were flat at USD 103.46 million in Q3FY13 as compared to USD 103.43 million in Q2FY13. In rupee terms, revenues witnessed a sequential decline of 0.69% to Rs 563.3 crore, which is more or less flat.

The major laggard for revenues was Cummins which is the company’s top client. It contributed to 19.11% of KPIT Cummins’ revenues. Revenues from Cummins declined sequentially by 3.63%. But at the same time, sequential growth rate in the top 5 and top 10 customer accounts was 3.9% and 2.8% respectively.

In terms of SBUs, Integrated Enterprise Solutions (IES), which contributed to 48.69% of total revenues, grew by 5.30% but it was held back by a decline in Auto & Engineering and SAP of 4.86% and 6.53% respectively.

There has been a massive growth and potential in the areas of big data, analytics, mobility, cloud and social media and KPIT Cummins has been making efforts to tap these. It has already registered a number of deal wins in the mobility space over the last few months. SYSTIME continued to help support growth for KPIT Cummins. Revenues from it grew by 7.15% QoQ to USD 18.2 million.

The EBITDA margin of KPIT Cummins was pressured in the quarter under review. It declined by 100 basis points to 15.66% in Q3FY13. The major reasons for this decline were loss of billing days, decline in average realisation rate and excess benching in SAP. However, it is confident that as it moves into Q4, it would register an increase of 100 to 150 basis points in the EBITDA margin.

Although there was a reduction in the EBITDA margin, the net profit boosted by 9.37% to Rs 50.44 crore. The reasons for this increase were ‘Other Income’ on account of forex gain of Rs 5.69 crore against a forex loss of Rs 21.35 crore in the previous quarter and an ‘Exceptional Item’ that includes Rs 9.45 crore from 100% impairment of a minority stake made in a foreign company.

With this, KPIT Cummins, while maintaining revenue guidance of 32% YoY growth for FY13, increased the profit guidance for FY13 from the earlier Rs 167 crore – 174 crore (YoY growth of 15-20%) to Rs 196 crore – 200 crore (YoY growth of 35-38%).

Overall, the result was mildly negative but the upward revision in profit guidance has resulted in a rather flat movement in the stock prices of KPIT Cummins.