KPIT Technologies Ltd.|Q2FY15 Result Update | Above expectation performance; Revival in Top account: Maintain BUY ::IndiaNivesh

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KPIT Technologies Limited (KPIT) Q2FY15 results was above our estimates on all
fronts. Revenue in dollar term was $125 mn (up 8.5% Q/Q) relative to INSPL
expectations of $119 mn led by 3.1% Q/Q increase in volume and 5.3% Q/Q
increase in pricing. During the quarter, onsite revenue de-grew by 3.1% Q/Q (to
$64 mn), partially offset by 23.9% Q/Q (to $64 mn) increase in the offshore
revenue. Rupee revenue went up 9.8% Q/Q to Rs.7,574 mn (INSPL est: Rs.7,212
mn). EBITDA stood at Rs.1,010 mn (INSPL est. Rs.1,002 mn), up 21.5% Q/Q on
back of higher revenue base. As a result, EBITDA margin expanded 128bps Q/Q
(v/s INSP est. of 184 bps q/q expansion) to 13.3%. The company reported 3.7% Q/
Q decline in interest expenditure to Rs.38.8 mn (v/s Rs 40.3 mn in Q1FY15) on
account of refinancing at lower interest rate and slight reduction in long-term
debt. Depreciation during the quarter stood at Rs.244.5 mn (v/s Rs.162.5 mn in
Q1FY15). KPIT reported other income of Rs.42.0mn (v/s Rs.101.4 mn in Q1FY15).
The forex gain for the quarter stood at Rs.10.8 mn against Rs.74.5 mn in Q1FY15.
The tax outgo during the quarter was Rs.62.5 mn leading to the tax rate of 8.1%
(v/s 30.4% in Q1FY15) on account of to lower required tax provisions. Net profit
went up 39.1% Q/Q to Rs.706.4 mn against Rs.508.0 mn in Q1FY15. Adjusting
other income & exceptional items, net profit went up 63.4% Q/Q to Rs.664 mn
(v/s Rs.407mn in Q1FY15). The management expect to close FY15E with $500 mn
of $-revenue (+12.4% Y/Y) with PAT growth of +7.1% Y/Y (to Rs.2,647 mn) relative
to the earlier PAT growth guidance range of 18-21% Y/Y (to Rs.2,940-3,005 Mn).
Key Result Takeaway
Top Clients grew, followed by Non-top 10 accounts
During the quarter, Cummins account demonstrated growth of 1.9% Q/Q to $18.6mn
(v/s $18.3mn in Q1FY15) and contributed 14.9% to overall revenue level.
Additionally, top-5/top-10 accounts reported $-revenue growth of 1.3%/3.0% Q/Q
to $40.1mn/$53.5mn (v/s $39.6mn/$51.9mn in Q1FY15) and contributed 32.1%/
42.8% to the overall revenue. Top-9 clients [ex. Cummins] accounted for 27.9% of
revenue and grew by 3.6% Q/Q to $34.9mn during the quarter. Non-top10 accounts
contributed 57.2% to the revenue, up 13.0% Q/Q to $72 mn (v/s $63 mn in Q1FY15).
The key reason for above company average growth in Non-Top10 accounts were on
the back of ramp-up in large deal, which got delayed in the last quarter.
Performance of key - SBU/Verticals/Geography
Except Europe [-5.7% Q/Q |cont 13.8%] remaining key geographies - US/RoW grew
by 4.4%/42.6% Q/Q and contributed 66.5%/19.8% of the overall revenue level.
Automotive & Transportation [+23.3% Q/Q to $46 mn], Energy [32.4% Q/Q to
$27mn], and Others [20.5% Q/Q to $12mn] lead the dollar revenue growth, partially
offset by Manufacturing [down 16.2% Q/Q to $40mn] verticals. Auto & Engineering,
SAP and Integrated Enterprise Solutions SBU reported revenue growth of 24.0%/
8.7%/0.5% Q/Q (to $38/$28/59 mn), respectively

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