Results better than expected; maintain ‘Buy’
KPIT Cummins Infosystems Ltd. (KPIT) Q1FY08 results were better than expected, with sequential rupee revenue growth of 3.8% to Rs1.35bn. Though the rupee appreciated by around 7% against USD in Q1FY08, revenue growth in USD was only 5.44%. The difference was primarily on account of the company converting dollar revenue at the average realised rate of Rs43.64, instead of the average Rs/USD rate of Rs40.82 during the quarter.
The company raised its FY08 revenue guidance by 1.4% (at the lower end) to US$145-148mn. However, on account of rupee appreciation, it reduced its profit guidance by 7% (at the lower end) to US$15.18-16.39mn.
KPIT Cummins Infosystems (KPIT) Q1FY08 result update (BUY)
Due to higher than expected Q1FY08 results we are increasing our FY08E and FY09E EPS estimates by 7.5% and 3.4% to Rs8.5 and Rs12.0 respectively, implying a two-year EPS CAGR of 3.9%. We have taken Rs/USD rate of Rs40.5 for the rest of FY08E and Rs40.0 for FY09E.
Currently, the stock is quoting at FY08E and FY09E PER of 16x and 11.2x respectively. With the company expected to post two-year EPS CAGR of 33.9%, we maintain ’Buy’ on the company with a price target of Rs156, 13x FY09E earnings.