We continue to remain positive and retain our BUY rating on the stock Target Price and Valuation: We value Birlasoft at | 475 i.e. 25x P/E on FY23E EPS Key triggers for future price performance: Revenue growth is expected to be achieved via client mining, cross sell,...

Improving client mining, healthy deal pipeline, cross selling opportunities, increase in deal sizes, project ramp ups, reversal of discounts and anticipated higher net new growth bode well for long term revenue growth. Further, robust margins and healthy cash balance (inorganic expansion or healthy dividend payout) prompt us to maintain BUY rating with a revised...

Sustained improvement in margins expected; going forward Birlasoft reported healthy margins in the quarter led by higher utilisation and offshoring. Going forward, we expect margins to improve mainly led by pyramid rationalisation, rationalisation of support staff & sub-contracting cost and increase in annuity revenues & fixed price projects partially offset by investment in reskilling of employees & geographic expansion. Hence, we expect margins to improve 259 bps YoY to 14.5% in FY21E and another 130 bps YoY to 15.8% (the company has guided margins to sustain over...

Birlasoft Ltd (Birlasoft) dollar revenues declined 4.6% QoQ mainly due to milestone achievement in large deal won in lifescience segment (which declined 20.5% QoQ), discounts and project deferrals. However, the company continues to execute well on margins front, which improved 158 bps QoQ (up 288 bps YoY) to 13.9% mainly led by rationalisation of SG&A; expenses and higher utilisation partially offset by higher onsite revenues. Net profit increased 22.7% QoQ to | 69.1 crore due to higher other income. The company has declared a dividend of | 1/share. Birlasoft's order book is...

Revenue from operations declined 1.6% QoQ to | 1061.3 crore (vs. our estimate of | 1092.6 crore). Revenues from IT services and solutions declined 6.6% QoQ to | 563.6 crore while revenue from the Engineering division grew 4.7% QoQ to | 497.6 crore Reported EBITDA was down 208 bps QoQ to 11.5%, largely due to...

3QFY19 revenue declined 1.7% QoQ in constant currency (3% miss). While Engineering SBU (43% of revenue) grew 6.4% QoQ, IT Business dragged with a decline of 7.5% QoQ 16 January 2019 due to completion of a few large projects. EBITDA margin shrank 60bp QoQ (excluding translation loss) 110bp miss due to weaker revenue. PAT declined 25% QoQ (+6% YoY) to INR656m, 14% below our estimate due to the operational miss. 3QFY19/9MFY19 data of the IT and Engineering businesses. The key surprise for us was the 9MFY19 EBITDA margin in Engineering Services, which stood at 11.8% v/s 15.4% for IT Services.

Maintain BUY with TP of Rs 285, 13x Sep-20E EPS. KPIT Tech (KPIT) posted in-line revenue (PES, Digital and Product led growth), profitability beat (business-mix, utilisation). Revenue came at USD 152.5mn, 1.3/7.4% QoQ/YoY. EBITDA% stood at 13.6%, +147bps QoQ and margins expected to improve ahead with lower G&A.; Revenue guidance of 8 to 10% YoY maintained (9.7% YoY in 1HFY18), while EBITDA margin guidance raised to 14% (ex-transaction expense) vs. 11.5 to 12.5% earlier.

ICICI Securities Ltd | Retail Equity Research KPIT reported better than expected margin performance in Q2FY19 while dollar revenues were in-line with our estimates. Revenues in constant currency grew 2.9% sequentially on the back of healthy growth in engineering services. Among geography, dollar revenue growth was led by Europe (15.5% QoQ). EBITDA margins surprised on the positive side and expanded 150 bps QoQ to 13.6% (above our estimate of 11.1%). Better than...

Sustainable margins to aid Profitability; Upgrade to BUY KPIT reports a muted Q2FY19 with USD revenue improving by 1.3% QoQ (2.9% QoQ in CC terms) to USD 153mn (DCMe: USD 153mn) led by engineering, technologies and products & platforms business. Rupee revenues improved 6.4% QoQ to ` 10,789mn (DCMe: ` 10,691mn) helped by INR depreciation. EBIT margin improved 73bps QoQ to 10.2% (DCMe: 7.9%) supported by operational efficiencies and FX tailwind which offset the negative impact of wage hike during the quarter. PAT improved 6%...

1Q Action Replay: Revenue Below Estimate, Margin Exceeds Estimate KPIT Technologies (KPIT) has delivered a mixed performance in 2QFY19. While its USD revenue grew by 1.3% QoQ to US$152.5mn (1.4% below our estimate), EBITDA margin rose by a robust 147bps QoQ. In CC terms, revenue rose by 2.9% QoQ. While IES (-5.9% QoQ) and SAP (-2.6% QoQ) businesses again pressurised revenue, USD revenue from Product Engineering and Products & Platforms (P&P;) businesses grew by a healthy 5.1% QoQ and 33.7% QoQ, respectively. Notably, P&P; business is lumpy in nature. Beating our estimate by 222bps, EBITDA margin expanded by a robust 147bps QoQ to 13.6% despite wage hike impact of 220bps owing to INR depreciation...

21 August 2018 After several years of coping with integration issues and legacy pressures in its IT services business, KPIT announced that it would demerge its Engineering business and merge the IT services bit with Birlasoft. KPITs Engineering business has been its strongpoint, exhibiting 16% revenue CAGR over the last five years. Birlasoft too has been under pressure because of issues in its top client and has witnessed a decline of ~4% in revenue over the last three years. However, we note that during this period, positioning, prowess and performance in the Engineering business has been strong; and a majority of the issues can be attributed to the companys presence and efforts in the IT services business. KPIT Technologies On completion of the transaction, we reckon the Engineering Services side should grow at a 20% CAGR.

KPIT reported a better-than-expected margin performance in Q1FY19 while revenues were below our estimates US$ revenues grew marginally by 0.2% QoQ to $150.5 million, below our 1.8% growth and $152.9 million estimate Revenues in rupees grew 4.9% QoQ to | 1013.8 crore, below our estimate of 6% growth and | 1024.8 crore EBITDA margins expanded ~70 bps QoQ to 12.1%, above our 50 bps expansion and 11.9% estimate. Better-than-expected margin...

KPIT Technologies (KPIT) has delivered a subdued revenue performance in 1QFY19, which grew 0.2% QoQ in USD terms to US$150.5mn (0.8% below our estimate). In CC terms, core service revenue rose by 3.5% QoQ. USD revenue from Product Engineering business grew by a healthy 5.5% QoQ, while IES revenue rose by a decent 2.7% QoQ. However, revenue from Products & Platforms declined by a steep 39.6% QoQ. It should be noted that this business is lumpy in nature. While Digital Transformation saw 2.2% QoQ growth, SAP continued to face growth headwinds with the business declining by 3.5% QoQ, marking the third successive quarter of decline. EBITDA margin expanded by 75bps (95bps ahead of our estimate) owing to INR...

Revenue above Industry Avg. coupled with margin improvement KPIT reported muted Q1FY19 with a USD revenue growth of 0.2% QoQ supported by services business. EBIT margin improved 74bps QoQ to 9.4% (DCMe: 9.5%) largely on back of operational efficiencies and INR depreciation. The stock is currently trading at inexpensive valuations 13.6x/11.3x FY20/FY21 earnings estimates. We believe revenue growth above industry avg., coupled with margin improvement will lead to absolute upside in near to medium term; upgrade the stock to ACCUMULATE...

ICICI Securities Ltd | Retail Equity Research KPIT reported a better than expected Q4FY18 on all fronts US$ revenues grew 6.4% QoQ to $150.2 million, above our 1% growth and $142.6 million estimate Revenues in rupees grew 5.9% QoQ to | 966.4 crore, above our estimate of 0.5% growth and | 917.5 crore EBITDA margins expanded ~50 bps QoQ to 11.4%, above our 30 bps expansion and 11.1% estimate. Margin expansion was on the...

Increase earnings est on margin reset and maintain NEUTRAL of KPIT with TP of Rs 250, 13x FY20E (12x earlier). KPIT Tech (KPIT) posted strong revenue and operating performance. Rev came at USD 150mn, 6.4/17.1% QoQ/YoY. Growth was led by PES (36.3% of rev) which grew 12% QoQ. EBITDA% came at 12.7%, +186bps QoQ (adjusted for one-time expense of Rs 129mn) supported by offshore-led growth. APAT at Rs 0.76bn was supported by lower ETR.

Impressive Performance; FY19E Revenue Outlook Fairly Conservative KPIT Technologies (KPIT) has delivered a strong performance in 4QFY18. Its revenue grew by 6.4% QoQ and topped US$150mn-mark (3.4% above our estimate) led by robust 12% QoQ growth (USD terms) in Product Engineering business. Revenue from Products & Platforms segment also grew by a healthy 49.9% QoQ, though this business typically shows volatility on quarterly basis. While revenue from Digital Transformation business grew by 6.3% QoQ, ERP business saw subdued growth (IES: up 0.3% QoQ & SAP: down 2.1% QoQ). Its EBITDA margin expanded by 53bps QoQ on higher utilisation and cost control measures. Notably, adjusting for one-time cost...

24 May 2018 4QFY18 revenue growth of 6.5% QoQ was above our estimate of +2.8%, primarily driven by strength in Product Engineering (+11% QoQ) and Products & Platforms (+49% QoQ). IT Services business remained sluggish, with SAP declining by 3% and IES remaining flat QoQ. 60bp QoQ to 11.4%, largely in-line. However, the quarter included expenses related to the demerger of the Engineering business and the merger with Birlasoft. Excluding these, EBITDA margin was at 12.7% (+190bp QoQ). PAT of INR838m was up 35% QoQ (est. KPIT guided for 8-10% revenue growth in FY19, despite the strong exit to FY18, implying a CQGR of 0.8-1.5%, which is much lower than the 4% achieved in FY18.

Board of Directors of KPIT Tech has approved a composite scheme for (a) amalgamation of Birlasoft (India) with KPIT (proposed merger); and (b) demerger of engineering business of KPIT into KPIT Engineering Ltd (KEL), and remaining KPIT-Birlasoft (IT Services business).