KPIT Update Note...KPIT Technologies Ltd. Absolute – ADD Relative – Benchmark 5% ATR in 14...

January 31, 2018 Analysts: Abhishek Shindadkar ([email protected] +91 9619137983, +91 22 4332 0634) of 17

Before reading this report, you must refer to the disclaimer on the last page.

KPIT Technologies Ltd. Absolute: ADD

Relative: BENCHMARK

Update Note: Est. (), PT (), Rating () Regular Coverage 5% ATR in 14months

When One Plus One Equals Eleven. Retain ADD IT Services

© 2018 Equirus All rights reserved

Rating Information

Price (Rs) 218

Target Price (Rs) 230

Target Date 31st Mar'19

Target Set On 30 Jan '18

Implied yrs of growth (DCF) 15

Fair Value (DCF) 172

Fair Value (DDM) 33

Ind Benchmark BSE IT

Model Portfolio Position NA

Stock Information

Market Cap (Rs Mn) 43,321

Free Float (%) 81.07 %

52 Wk H/L (Rs) 223.4/104.05

Avg Daily Volume (1yr) 1,729,168

Avg Daily Value (Rs Mn) 239

Equity Cap (Rs Mn) 395

Face Value (Rs) 2

Bloomberg Code KPIT IN

Ownership Recent 3M 12M

Promoters 18.9 % 0.0 % 0.0 %

DII 12.4 % -0.1 % -0.1 %

FII 44.1 % 1.7 % 1.7 %

Public 24.5 % -1.6 % -1.6 %

Price % 1M 3M 12M

Absolute 21.4 % 57.0 % 61.9 %

Vs Industry 8.8 % 35.2 % 33.4 %

Hexaware 12.4 % 31.0 % 91.4 %

Mindtree 24.8 % 60.1 % 64.9 %

Standalone Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (17A) 2.9 3.0 2.5 2.8

EPS (18E) 2.8 3.2 3.3 3.9

KPIT‟s reported 3QFY18 earnings last week and has approved a composite scheme for

(1) amalgamation of Birlasoft with KPIT, and (2) demerger of engineering business

into KPIT Engineering Limited (KEL). KPIT-Birlasoft will focus on IT services business

while KEL‟s shares will be separately listed and shareholders would receive one share

of KEL for every one held in the merged entity. Overall the deal creates value

unlocking for existing shareholders with an option to own IT services and ER&D

businesses. Per management, the deal could take 12-18 months to complete and

FY19e earnings would mirror current business. We are raising EPS estimates modestly

to account for margin beat and leads to increase in TP to Rs.230, set at 15x Mar‟19

TTM EPS of Rs 15.3. Retain ADD as shareholder value creation to anchor shares. Merger timelines: Management expects the deal could take 12-18months to fructify

as timelines include (1) completion of open offer (2-3 months assuming requisite SEBI

clearances), (2) NCLT approval, and (3) internal mechanism including EGM‟s.

Consequently, FY19e revenue/earnings would mirror current business. Rationale for demerger and why Birlasoft? KPIT highlighted that current IT

services/ER&D customer overlap is less than 2-3% and operating two separate

entities with minimal cross functional efficiency led to identity confusion. As for

Birlasoft, merits include, (1) offers necessary customer attention required from a

mid-size player, (2) long term interest of the group helps in employee retention, and

complementary (a) offerings (KPIT has 60% ERP focus; Birlasoft has 85% non-ERP

revenues), (b) verticals focus (manufacturing/energy for KPIT; BFSI for Birlasoft),

and (c) geo focus (US/Asia for KPIT; US/Europe for Biralsoft). What could be the sum-of-the-part worth of the franchise? Based on our pre-3Q

FY20e revenue estimate for KPIT, if we were to exclude PES business (assuming

3QFY18 contribution), add Birlasoft contribution (assuming 10% growth each in

FY19e/FY20e), and assuming 8% PAT margins for the combined entity, pro-forma

FY20e revenue/PAT estimate could be Rs. 38.8bn/3.1bn. Assuming NIIT Tech

multiple (14.7x based on FY20e EPS) implies a Mcap of Rs. 45.6bn. Similarly,

assuming 14% growth each in FY19e/FY20e for PES business, 10% PAT margins, and

Cyient multiple (13.7x based on FY20e EPS) implies Rs.18.5bn/Rs.1.8 as revenue/PAT

estimate & Mcap of Rs. 25.3bn. Together, per share value of the franchise could be

~Rs. 257, assuming 76.6mn dilution. Note, these are pro-forma assumptions. Retain ADD on value unlocking: Sustainable margin performance, growth recovery,

and shareholder value creation initiatives continue to influence our rating & TP.

Inability to sustain current operating performance could be key risk to our thesis.

Change in Estimates:

Revised Estimates % Change over Old Estimates

FY18E FY19E FY18E FY19E

US$ Sales 561 599 0% 0%

Sales(Rs.) 36,310 39,211 0% -2%

EBITDA 3,802 4,508 1% 3%

EBIT 3,025 3,730 1% 4%

PAT 2,503 2,891 2% 4%

EPS 13.2 15.3 2% 4%

Consolidated Financials

Rs. Mn YE Mar FY17A FY18E FY19E FY20E

Sales 33,200 36,310 39,211 42,170

EBITDA 3,486 3,802 4,508 5,463

Depreciation 827 777 778 813

Interest Expense 136 113 143 131

Other Income 207 305 267 363

Reported PAT 2,385 2,503 2,891 3,662

Recurring PAT 2,125 2,486 2,891 3,662

Total Equity 15,841 17,898 20,221 23,270

Gross Debt 3,334 3,760 3,460 3,160

Cash 3,902 4,982 6,422 8,116

Rs Per Share FY17A FY18E FY19E FY20E

Earnings 11.3 13.2 15.3 19.4

Book Value 84 95 107 123

Dividends 2.2 2.3 2.5 2.7

FCFF -4.0 9.4 12.8 14.3

P/E (x) 19.3 16.5 14.2 11.2

P/B (x) 2.6 2.3 2.0 1.8

EV/EBITDA (x) 12.4 11.1 9.0 7.0

ROE (%) 14 % 15 % 15 % 17 %

Core ROIC (%) 14 % 14 % 16 % 19 %

EBITDA Margin (%) 11 % 10 % 11 % 13 %

Net Margin (%) 6 % 7 % 7 % 9 %

Lenovo

Sticky Note

KPIT Technologies Ltd. Absolute – ADD Relative – Benchmark 5% ATR in 14 Months


FY18e growth to range 13-14%. Constant currency revenues were flat qoq while

growth was led by PES SBU (grew 2.8% qoq, 38.9% of revenues). Rest of the verticals

Digital SBU (-2.7% qoq, 10.3% of revenues), IES SBU (-0.8% qoq, 26.9%), SAP SBU (-2.9%,

20%) and P&P SBU (-8.2%, 3.8%) were soft. Geographically, growth was led by the Europe

(19.9% of revenues, grew 7.3% qoq led by growth in engineering and digital) while Asia

(16.4%, -8.3% qoq) and US (63.6%, -0.4%) declined. We are retaining our 13.5% yoy growth

estimate given management expects FY18e growth to range 13-14%.

EBITDAM commentary remains optimistic: Reported EBITDAM (10.8%) were ahead

of EE (10.2%) driven by 130bps of GM expansion. Headwinds were offset by tailwinds from

change in revenue mix towards engineering, cost structure improvement, and utilisation.

Management reiterated that GM improvement driven by change in mix/quality of

revenues, & operating efficiency, and SG&A leverage (1-2% depending on growth, will be

visible throughout FY19e) are key margin levers. Consequently, we are raising our

FY18e/FY19e margin assumption to 10.5%/11.5%, respectively, vs. 10.3%/11.0% earlier.

Exhibit 1: Comparable valuations

P/Sales EV/EBITDA P/E P/B RoE

Market Cap (Rs. mn) FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E

Cyient 70,081 1.9x 1.8x 1.6x 1.5x 13.1x 11.4x 9.8x 8.5x 20.5x 16.9x 15.4x 13.6x 3.3x 3.1x 2.9x 2.7x 17.4% 19.1% 19.6% 20.6%

L&T Tech 130,500 4.0x 3.5x 3.1x 2.8x 22.1x 22.7x 17.7x 15.4x 30.5x 27.5x 23.7x 21.3x 8.7x 7.1x 5.9x 5.0x 33.3% 28.4% 27.2% 25.5%

Tata Elxsi 67,433 5.5x 4.9x 4.2x 3.8x 23.9x 19.8x 17.0x 14.5x 38.9x 31.4x 27.0x 24.2x 12.1x 9.5x 7.6x 5.6x 36.7% 33.8% 31.2% 28.8%

Average (ER&D) 3.8x 3.4x 3.0x 3.0x 19.7x 18.0x 14.8x 12.8x 30.0x 25.3x 22.0x 19.7x 8.0x 6.6x 5.5x 4.4x 29.1% 27.1% 26.0% 25.0%

Hexaware 113,631 3.2x 2.9x 2.6x 2.3x 18.9x 16.1x 14.5x 12.6x 26.8x 22.7x 21.9x 19.4x 6.7x 5.5x 4.7x 4.0x 26.9% 26.5% 23.0% 22.2%

L&T Infotech 228,887 3.5x 3.2x 2.7x 2.4x 17.5x 16.9x 14.3x 11.9x 23.6x 20.3x 18.2x 16.6x 7.3x 6.1x 5.2x 4.5x 36.8% 32.7% 30.7% 29.3%

Mindtree 125,313 2.4x 2.3x 2.1x 1.8x 16.4x 16.5x 13.2x 11.1x 30.1x 24.3x 21.3x 18.4x 4.9x 4.7x 4.2x 3.4x 16.7% 19.6% 20.8% 21.2%

Mphasis 185,872 3.1x 2.9x 2.6x 2.3x 16.5x 15.7x 13.7x 12.5x 23.5x 22.9x 19.9x 16.3x 3.0x 3.0x 2.8x 2.6x 13.2% 13.2% 14.5% 16.8%

NIIT Tech 52,755 1.9x 1.8x 1.6x 1.5x 10.8x 9.5x 8.0x 7.1x 19.4x 18.9x 16.3x 14.7x 3.1x 2.7x 2.4x 2.2x 16.7% 15.3% 15.5% 15.5%

Average (Services) 2.8x 2.6x 2.3x 2.1x 16.0x 14.9x 12.7x 11.1x 24.7x 21.8x 19.5x 17.1x 5.0x 4.4x 3.8x 3.3x 22.1% 21.5% 20.9% 21.0%

Average(Overall) 3.2x 2.9x 2.6x 2.3x 17.4x 16.1x 13.5x 11.7x 26.7x 23.1x 20.5x 18.0x 6.1x 5.2x 4.5x 3.7x 24.7% 23.6% 22.8% 22.5%

Source: Bloomberg (LTI, Mindtree, Mphasis and Tata Elxsi), Cyient, LTTS, Hexaware and NIIT Tech numbers are from Equirus estimates. Figures are updated on 30th January, 2018 post market hours.



Exhibit 2: A&T, energy lead; manufacturing decline

Vertical Performance Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18

Automotive & Transportation 8.7% -2.8% 8.4% 3.3% 12.3% 1.4%

Manufacturing -4.4% 4.8% -3.6% -1.0% 0.8% -5.4%

Energy & Utilities -7.7% -3.0% 3.6% 32.1% 4.1% 4.9%

Others 32.6% -5.3% 19.7% -6.6% -4.8% -2.7%

Source: Company, Equirus Research

Exhibit 3: Except product engineering all SBU’s declined qoq

Service-line Performance Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18

Integrated Enterprise Solutions -2.7% -0.9% -2.3% 5.7% 2.0% -0.8%

Product Engineering Services 1.7% -4.9% 16.6% 3.8% 13.2% 2.8%

Products & Platforms 113.7% -13.9% 4.1% 48.5% -20.0% -8.3%

SAP -2.1% 2.1% 1.4% -0.4% 0.1% -3.0%

Digital 15.7% 16.9% -5.9% 0.3% 13.9% -2.8%


Exhibit 3 (a): Top customer revenues grew sequentially for a third

consecutive quarter

Avg Revenue/Client Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18

Top Client (Cummins) $ mn 16.2 15.5 15.9 16.7 17.0 17.2

QoQ Growth 5.4% -3.9% 2.1% 5.5% 1.9% 0.8%

Top 5 Clients ($ mn) 6.9 6.7 6.8 - - -

QoQ Growth 1.8% -2.3% 1.6% - - -

Top 10 Client ($ mn) 4.8 4.4 4.8 - - -

QoQ Growth -1.5% -7.5% 9.3% - - -

Overall ($ mn) 0.6 0.5 0.6 0.6 0.6 0.6

QoQ Growth 1.7% -1.3% 3.0% 3.8% 3.7% -1.7%


Exhibit 3 (b): Top client contribution stabilising

Contribution Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18

Top Client (Cummins) % 13.1% 12.6% 12.4% 12.5% 12.0% 12.2%

Top 5 Clients % 27.8% 27.2% 26.5% 51.5%* 49.5%* 49.6%*

Top 10 Clients % 38.6% 38.9% 37.5% 60.6%** 59.7%** 61.3%**

Non-Top 10 Clients % 61.5% 61.1% 62.5% 39.4%# 40.3%# 38.7%#

*top 20 clients’ contribution **top 40 clients’ contribution #Non-top 40 clients Source: Company, Equirus Research

Exhibit 4: Onsite-offshore mix increases with onsite contribution up 80 bps

Source: Company, Equirus Research, SI (Telematics solution not included)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec-1

1

Mar-

12

Jun-1

2

Sep-1

2

Dec-1

2

Mar-

13

Jun-1

3

Sep-1

3

Dec-1

3

Mar-

14

Jun-1

4

Sep-1

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Dec-1

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Mar-

15

Jun-1

5

Sep-1

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Dec-1

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Mar-

16

Jun-1

6

Sep-1

6

Dec-1

6

Mar-

17

Jun-1

7

Sep-1

7

Dec-1

7

Onsite Offshore



Exhibit 5: Blended utilization improves 60bps qoq

Source: Bloomberg, Equirus Securities

Exhibit 6: EBITM trends: Up 85bps qoq and 73bps qoq

Margin Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18

EBITM 13.6% 8.3% 8.6% 7.9% 7.3% 6.9% 7.8% 8.6%


Exhibit 7: Geographic contribution stable qoq Geographical Segmentation

4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18

USA 68.9% 67.5% 67.2% 70.1% 67.7% 63.9% 63.7% 63.7%

Europe 18.0% 18.4% 16.2% 14.4% 16.8% 18.8% 18.5% 19.9%

RoW 13.0% 13.1% 16.6% 15.5% 15.6% 17.3% 17.9% 16.4%


Key concall takeaways:

FY18e growth range 13-14%.

EBITDAM could expand sequentially in 4q driven GM improvement (change in

mix/quality of revenues, & operating efficiency) and SG&A leverage.

Blended utilization improved ~60bps qoq to 74.3%. Utilisation could improve

from current levels.

Sub-contracting costs stood at Rs.940mn vs. Rs. 1.04bn in 2QFY18 vs. Rs 1.13bn

in 1QFY18.

Sub-contracting expenses could be rationalized by local hiring and offshoring

going forward.

Days sales outstanding (DSO) for 3QFY18 declined to 71 days from 73 days.

77% 77%

76%

74% 74% 74%

75%

73%

69%

70%

73% 73% 74%

71.5%

72.3%

71.1%

71.5%

71.9%

73.7% 74.3%

64%

66%

68%

70%

72%

74%

76%

78%

Q4FY13

Q1FY14

Q2FY14

Q3FY14

Q4FY14

Q1FY15

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18



Quarterly performance (consolidated)

Rs Mn 3QFY18 3QFY18E 2QFY18 3QFY17 % Change

Comments 3QFY18E 2QFY18 3QFY17

Net Sales 9,128 9,204 9,160 8,307 -0.8% -0.4% 9.9%

Net Sales ($ mn) 141.2 142.1 141.8 122.9 -0.6% -0.4% 14.9%

Employee Benefit Expenses 5,770 5,935 5,922 5,358 -2.8% -2.6% 7.7%

Other Expenses 2,368 2,329 2,336 2,103 1.7% 1.4% 12.6%

Total Expenditures 8,139 8,264 8,258 7,461 -1.5% -1.4% 9.1%

EBITDA 989 939 903 846 5.3% 9.6% 16.9%

Depreciation 204 194 193 191 5.1% 5.7% 6.4%

EBIT 786 745 710 654 5.4% 10.6% 20.0%

Interest 24 30 26 66 -18.8% -6.3% -63.0%

Other Income 25 80 114 29 -68.5% -77.7% -13.2%

PBT 787 796 798 618 -1.2% -1.5% 27.3%

Tax 168 195 195 143 -14.1% -14.0% 17.2%

Recurring PAT 619 601 603 475 3.0% 2.6% 30.3%

Extraordinaries 2 0 6 -261

Reported PAT 617 601 597 736 2.6% 3.3% -16.2%

EPS (Rs) 3.3 3.2 3.2 2.5 3.0% 2.6% 30.3%

EBITDA Margin 10.8% 10.2% 9.9% 10.2% 63 bps 98 bps 65 bps

EBIT Margin 8.6% 8.1% 7.8% 7.9% 51 bps 85 bps 73 bps

PBT Margin 8.6% 8.6% 8.7% 7.4% -3 bps -10 bps 118 bps

PAT Margin 6.8% 6.5% 6.5% 8.9% 23 bps 24 bps -210 bps

Tax Rate 21.3% 24.5% 24.4% 23.1% -320 bps -310 bps -184 bps



Exhibit 8: Growth Metrics

Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17

Net Sales ($ Mn) 118 125 123 124 120 123 123 128 134 142 141

Growth QoQ (%) -3.3% 5.3% -1.0% 0.7% -3.5% 3.0% -0.4% 4.4% 4.8% 5.5% -0.4%

Net Sales (Rs. Mn) 7,593 8,123 8,130 8,410 8,032 8,310 8,307 8,585 8,704 9,160 9,128

Growth (%) -0.5% 7.0% 0.1% 3.4% -4.5% 3.5% 0.0% 3.3% 1.4% 5.2% -0.4%

USD-INR realized rate 64.2 65.2 65.9 67.7 67.1 67.3 67.6 66.9 64.8 64.6 64.6

Onsite - Offshore Split Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17

Onsite 55.3% 55.1% 58.8% 57.9% 58.5% 56.2% 57.0% 55.8% 53.1% 55.2% 56.0%

Offshore 43.7% 44.1% 40.9% 41.4% 41.1% 42.7% 42.3% 43.3% 43.6% 42.7% 43.2%

SI (Telematics) 1.0% 0.8% 0.3% 0.7% 0.4% 1.1% 0.7% 0.8% 3.3% 2.1% 0.9%

Contract Type Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17

Fixed Price 72.9% 72.1% 70.6% 72.9% 71.2% 70.9% 65.6% 63.3% 61.9% 61.6% 61.1%

Time & Materials 26.2% 27.1% 29.1% 26.4% 28.5% 28.0% 33.7% 35.8% 34.8% 36.2% 38.0%

Geographical split of revenues (%) Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17

USA 69.7% 67.0% 69.6% 68.9% 67.5% 67.2% 70.1% 67.7% 63.9% 63.7% 63.7%

Europe 16.8% 18.2% 17.5% 18.0% 18.4% 16.2% 14.4% 16.8% 18.8% 18.5% 19.9%

Rest of the World 13.6% 14.8% 13.0% 13.1% 14.1% 16.6% 15.5% 15.6% 17.3% 17.9% 16.4%

Customer Concentration (%) Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17

Top 5 (%) 30.7% 29.7% 27.2% 26.8% 28.1% 27.8% 27.2% 26.5% - - -

Top 10 (%) 42.1% 41.5% 39.4% 39.3% 40.3% 38.6% 38.9% 37.5% - - -

Non-top 10 27.2% 28.8% 33.4% 34.0% 31.6% 33.7% 33.9% 36.0% - - -



Exhibit 9: Segment Performance

Segment wise - Contribution Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

Integrated Enterprise Solutions 33.0% 30.9% 35.5% 31.5% 29.7% 29.6% 27.7% 27.9% 27.0% 26.9%

Product Engineering Services 31.7% 31.2% 30.0% 33.7% 33.3% 31.8% 35.5% 35.2% 37.7% 39.0%

Products & Platforms 4.0% 2.9% 3.8% 2.2% 4.5% 3.9% 3.9% 5.5% 4.2% 3.8%

SAP 21.9% 25.9% 22.5% 24.0% 22.8% 23.4% 22.7% 21.6% 20.5% 20.0%

Enterprise Solutions/Digital Trans 9.4% 9.1% 8.2% 8.6% 9.7% 11.4% 10.3% 9.8% 10.6% 10.3%

Segment wise - Revenue Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

Integrated Enterprise Solutions 41.10 38.09 44.06 37.68 36.66 36.31 35.49 37.51 38.27 37.95

Product Engineering Services 39.51 38.51 37.28 40.40 41.10 39.08 45.55 47.26 53.52 55.00

Products & Platforms 5.01 3.54 4.74 2.60 5.55 4.78 4.98 7.39 5.91 5.42

SAP 27.33 31.93 27.93 28.77 28.17 28.75 29.15 29.04 29.08 28.21

Enterprise Solutions/Digital Trans 11.67 11.22 10.14 10.33 11.95 13.97 13.15 13.18 15.02 14.60

Segment wise - yoy growth Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

Integrated Enterprise Solutions -6.9% -18.1% -10.8% -4.7% -19.5% -0.5% 4.4% 4.5%

Product Engineering Services 23.5% 24.6% 4.0% 1.5% 22.2% 17.0% 30.2% 40.7%

Products & Platforms -62.9% -20.7% 10.9% 35.1% 5.0% 184.4% 6.5% 13.4%

SAP 31.4% 15.4% 3.1% -9.9% 4.4% 0.9% 3.3% -1.9%

Enterprise Solutions/Digital Trans -6.1% -11.6% 2.4% 24.5% 29.7% 27.7% 25.7% 4.5%

Segment wise - qoq growth Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

Integrated Enterprise Solutions -10.7% -7.3% 15.7% -14.5% -2.7% -0.9% -2.3% 5.7% 2.0% -0.8%

Product Engineering Services 21.8% -2.5% -3.2% 8.4% 1.7% -4.9% 16.6% 3.8% 13.2% 2.8%

Products & Platforms 52.8% -29.3% 34.0% -45.2% 113.7% -13.9% 4.1% 48.5% -20.0% -8.3%

SAP 9.6% 16.8% -12.5% 3.0% -2.1% 2.1% 1.4% -0.4% 0.1% -3.0%

Enterprise Solutions/Digital Trans -0.1% -3.9% -9.6% 1.8% 15.7% 16.9% -5.9% 0.3% 13.9% -2.8%



Exhibit 10: Vertical Performance

Vertical wise - Contribution Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

Automotive & Transportation 37.3% 36.2% 39.1% 38.6% 40.7% 39.8% 41.3% 40.7% 43.3% 44.1%

Manufacturing 33.3% 36.4% 35.0% 37.5% 34.8% 36.6% 33.8% 31.9% 30.5% 29.0%

Energy & Utilities 21.3% 20.2% 18.0% 16.1% 14.4% 14.1% 14.0% 17.6% 17.4% 18.3%

Others 8.2% 7.2% 7.9% 7.8% 10.1% 9.6% 11.0% 9.8% 8.8% 8.6%

Vertical wise - Revenue Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

Automotive & Transportation 46.49 44.57 48.54 46.22 50.25 48.86 52.98 54.71 61.43 62.28

Manufacturing 41.42 44.91 43.48 44.91 42.94 44.99 43.35 42.90 43.26 40.93

Energy & Utilities 26.48 24.95 22.32 19.31 17.82 17.29 17.91 23.65 24.62 25.81

Others 10.18 8.85 9.82 9.35 12.40 11.75 14.06 13.13 12.51 12.17

Vertical wise - yoy growth Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

Automotive & Transportation 0.1% -2.0% -3.9% 6.2% 8.1% 9.6% 9.1% 18.4% 22.2% 27.5%

Manufacturing 4.9% 8.2% 4.2% 1.9% 3.7% 0.2% -0.3% -4.5% 0.7% -9.0%

Energy & Utilities -2.3% -9.3% 2.7% -12.6% -32.7% -30.7% -19.8% 22.5% 38.1% 49.3%

Others -14.9% -25.9% 17.3% 8.3% 21.9% 32.7% 43.2% 40.4% 0.8% 3.6%

Vertical wise - qoq growth Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

Automotive & Transportation 6.9% -4.1% 8.9% -4.8% 8.7% -2.8% 8.4% 3.3% 12.3% 1.4%

Manufacturing -6.0% 8.4% -3.2% 3.3% -4.4% 4.8% -3.6% -1.0% 0.8% -5.4%

Energy & Utilities 19.8% -5.8% -10.5% -13.5% -7.7% -3.0% 3.6% 32.1% 4.1% 4.9%

Others 17.8% -13.0% 10.9% -4.7% 32.6% -5.3% 19.7% -6.6% -4.8% -2.7%



Exhibit 11: Geographical performance

Geography wise - Contribution Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

USA 67.0% 69.6% 68.9% 67.5% 67.2% 70.1% 67.7% 63.9% 63.7% 63.7%

Europe 18.2% 17.5% 18.0% 18.4% 16.2% 14.4% 16.8% 18.8% 18.5% 19.9%

Rest of the World 14.8% 13.0% 13.1% 14.1% 16.6% 15.5% 15.6% 17.3% 17.9% 16.4%

Geography wise - Revenue Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

USA 83.45 85.77 85.55 80.83 82.98 86.13 86.81 85.90 90.26 89.87

Europe 22.71 21.55 22.40 22.03 20.01 17.72 21.49 25.29 26.23 28.11

Rest of the World 18.41 15.96 16.21 16.92 20.44 19.03 20.00 23.21 25.31 23.21

Geography wise - yoy growth Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

USA 0.4% 0.7% 8.4% -1.9% -0.6% 0.4% 1.5% 6.3% 8.8% 4.4%

Europe 32.3% 9.9% 8.6% 11.1% -11.9% -17.8% -4.0% 14.8% 31.1% 58.7%

Rest of the World -25.6% -26.4% -28.9% 5.3% 11.0% 19.2% 23.4% 37.1% 23.8% 22.0%

Geography wise - qoq growth Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

USA 1.3% 2.8% -0.2% -5.5% 2.7% 3.8% 0.8% -1.1% 5.1% -0.4%

Europe 14.5% -5.1% 3.9% -1.6% -9.2% -11.4% 21.3% 17.7% 3.7% 7.2%

Rest of the World 14.5% -13.3% 1.6% 4.4% 20.8% -6.9% 5.1% 16.0% 9.0% -8.3%



Exhibit 12: Top client performance

Top Clients - Contribution Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

Top Client (Cummins) 14.2% 14.1% 13.9% 12.8% 13.1% 12.6% 12.4% 12.5% 12.0% 12.2%

Top-5 clients 29.7% 27.2% 26.8% 28.1% 27.8% 27.2% 26.5%

Top 10 Client 41.5% 39.4% 39.3% 40.3% 38.6% 35.8% 37.5%

Top 2-5 clients 15.5% 13.2% 12.8% 15.3% 14.7% 14.6% 14.1%

Top 6-10 clients 11.8% 12.2% 12.5% 12.2% 10.8% 8.6% 11.0%

Top Clients - Revenue Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

Top Client (Cummins) 17.66 17.33 17.31 15.33 16.16 15.53 15.86 16.73 17.04 17.18

Top-5 clients 37.02 33.54 33.23 33.67 34.26 33.47 34.00

Top 10 Client 51.71 48.61 48.77 48.30 47.58 44.02 48.11

Top 2-5 clients 19.36 16.21 15.93 18.34 18.11 17.94 18.14

Top 6-10 clients 14.69 15.06 15.53 14.63 13.32 10.54 14.11

Top Clients - yoy growth Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

Top Client (Cummins) -5.2% -5.9% -5.3% -8.6% -8.5% -10.4% -8.4% 9.1% 5.5% 10.6%

Top-5 clients -7.7% -7.1% -9.6% -7.4% -7.4% -0.2% 2.3%

Top 10 Client -3.3% -2.5% -4.1% -3.0% -8.0% -9.5% -1.3%

Top 2-5 clients -9.9% -8.4% -13.9% -6.4% -6.5% 10.7% 13.9%

Top 6-10 clients 9.6% 9.7% 10.2% 9.1% -9.3% -30.0% -9.1%

Top Clients - qoq growth Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17

Top Client (Cummins) 5.4% -1.9% -0.2% -11.4% 5.4% -3.9% 2.1% 5.5% 1.9% 0.8%

Top-5 clients 1.8% -9.4% -0.9% 1.3% 1.8% -2.3% 1.6%

Top 10 Client 3.9% -6.0% 0.3% -1.0% -1.5% -7.5% 9.3%

Top 2-5 clients -1.2% -16.3% -1.7% 15.1% -1.3% -0.9% 1.1%

Top 6-10 clients 9.6% 2.6% 3.1% -5.8% -8.9% -20.8% 33.9%



Company Snapshot

How we differ from Consensus

- Equirus Consensus % Diff Comment

EPS FY18E 13.2 12.2 8 % Consensus numbers before the earnings.

FY19E 15.3 14.5 6 %

Sales FY18E 36,310 36,367 0 %

FY19E 39,211 39,984 -2 %

PAT FY18E 2,486 2,402 3 %

FY19E 2,891 2,857 1 %

Our Key Investment arguments:

Visibility has improved and is reflected in the guidance. Execution continues to be demanding but is improving,

Topline growth would be led by the automotive and life sciences verticals, Products and platform SBU and Digital.

Recovery in energy vertical spends.

Key Assumptions FY17A FY18E FY19E FY20E

Overall US$ Revenue $494.4 $560.8 $598.6 $638.9

USD-INR Rate 67.2 64.8 65.5 66.0

Ending Headcount 12,107 12,261 12,341 12,971

Onsite billing rate (US$/hr) $98.6 $99.8 $102.4 $106.5

Offshore billing rate (US$/hr) $17.7 $18.9 $19.1 $19.7

Employee benefit expenses (% of

revenue) 63.7% 63.5% 63.5% 62.9%

Other expenses (% of revenue) 25.8% 26.1% 25.0% 24.1%

EBITDA (%) 10.5% 10.5% 11.5% 13.0%

EBIT % 8.0% 8.3% 9.5% 11.0%

PAT % 6.4% 6.8% 7.4% 8.7%

Risk to Our View: (1) Replenishing deceleration in average ~28% of the portfolio could be

demanding (2) Declining wallet share within top customers, if any. (3) Sustaining top

customer growth achieved in previous 3 quarters.

Key Triggers

Revival in key verticals, strong account mining, robust performance in automotive,

utilities and life sciences verticals, and rupee depreciation. Improvement in margins.

Sensitivity to Key Variables % Change % Impact on EPS

Rupee Appreciation 1 % -2%

DCF Valuations & Assumptions

Rf Beta Ke Term. Growth Debt/IC in Term. Yr

6.9 % 1.0 12.7 % 3.0 % 10.0 %

- FY18E FY19E FY20-22E FY23-27E FY28-32E

Sales Growth 9 % 8 % 6 % 5 % 8 %

NOPAT Margin 6 % 7 % 8 % 8 % 8 %

IC Turnover 2.07 2.15 2.11 2.06 2.05

RoIC 13.6 % 15.6 % 18.0 % 17.3 % 17.4 %

Years of strong growth 1 2 5 10 15

Valuation as on date (Rs) 117 132 162 161 164

Valuation as of 31st Mar „19 123 139 171 169 172

Based on DCF, assuming 15 years of 8% sales CAGR and 17% average ROIC, we derive

current fair value of Rs. 161 and 31st Mar‟19 fair value of Rs.169.

Company Description:

KPIT is a mid-tier Indian IT firm. Since 2009, it has chosen a strategy of focusing on the

verticals of Manufacturing, Automotive and Energy & Utilities. It is currently the largest

third-party Indian vendor for automotive electronics. It has also tried to build a

leadership position in other niches like J.D. Edwards services for which it has three

advanced specializations - which no other Indian vendor.

Comparable valuation Mkt Cap

Rs. Mn.

Price

Target

Target

Date

EPS P/E BPS P/B RoE Div Yield

Company Reco. CMP FY17A FY18E FY19E FY17A FY18E FY19E FY17A FY18E FY17A FY18E FY19E FY17A FY18E

KPIT Tech ADD 218 43,321 230 31st Mar'19 11.3 13.2 15.3 19.3 16.5 14.2 84.3 2.3 14 % 15 % 15 % 1.0 % 1.1 %

Hexaware Technologies Ltd.

ADD 382 113,672 306 30th Jun'19 14.2 16.9 17.4 26.8 22.7 21.9 56.7 5.5 27 % 26 % 23 % 2.4 % 1.0 %

Mindtree NR 764 125,313 NR NR 24.8 30.9 35.6 30.9 24.7 21.5 157.9 7.8 19 % 29 % 28 % 1.3 % 0.5 %



Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q17A 2Q17A 3Q16A 4Q17A 1Q18A 2Q18A 3Q18E 4Q18E 1Q19E 2Q19E 3Q17E 4Q19E FY17A FY18E FY19E FY20E

Revenue 8,032 8,310 8,307 8,585 8,704 9,160 9,128 9,319 9,577 9,831 9,839 9,964 33,200 36,310 39,211 42,170

Employee Benefit Expenses 5,088 5,239 5,358 5,477 5,506 5,922 5,770 5,846 6,041 6,329 6,240 6,272 21,161 23,044 24,882 26,535

Other Expenses 2,089 2,157 2,103 2,237 2,402 2,336 2,368 2,358 2,394 2,526 2,460 2,441 8,553 9,464 9,822 10,172

- - - - - - - - - - - - - - - - -

EBITDA 856 914 846 870 795 903 989 1,116 1,142 975 1,140 1,251 3,486 3,802 4,508 5,463

Depreciation 188 200 191 248 190 193 204 191 191 194 196 196 827 777 778 813

EBIT 668 714 654 623 605 710 786 925 951 781 944 1,054 2,660 3,025 3,730 4,651

Interest 56 14 66 0 26 26 24 38 37 36 35 35 136 113 143 131

Other Income 116 49 29 12 121 114 25 45 73 79 56 60 207 305 267 363

PBT 728 750 618 635 699 798 787 932 986 824 965 1,080 2,730 3,216 3,854 4,883

Tax 177 188 143 97 170 195 168 199 247 206 241 270 606 731 964 1,221

PAT bef. MI & Assoc. 551 562 475 537 530 603 619 734 740 618 723 810 2,125 2,486 2,891 3,662

Minority Interest 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Profit from Assoc. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Recurring PAT 551 562 475 537 530 603 619 734 740 618 723 810 2,125 2,486 2,891 3,662

Extraordinaries 0 0 -261 0 -26 6 2 0 0 0 0 0 -261 -17 0 0

Reported PAT 551 562 736 537 555 597 617 734 740 618 723 810 2,385 2,503 2,891 3,662

EPS (Rs) 2.92 2.98 2.52 2.85 2.81 3.20 3.28 3.89 3.92 3.28 3.84 4.29 11.27 13.18 15.33 19.42

Key Drivers

Revenue ($ mn) 119.8 123.4 122.9 128.3 134.4 141.8 141.2 143.4 146.2 150.1 150.2 152.1 494.4 560.8 598.6 638.9

USD INR 67.1 67.3 67.6 66.9 64.8 64.6 64.6 65.0 65.5 65.5 65.5 65.5 67.2 64.8 65.5 66.0

Onsite Utilization % 89.0% 89.6% 89.1% 89.4% 89.4% 92.6% 93.2% 93.0% 92.5% 93.0% 92.0% 92.5% 89.3% 92.1% 92.5% 92.4%

Offshore Utilization % 68.1% 69.2% 67.8% 68.3% 68.8% 70.2% 70.8% 72.0% 73.2% 74.5% 74.5% 74.0% 68.3% 70.5% 74.1% 74.1%

Onsite Billing Rate Growth % -1.5% -0.7% -0.4% -0.4% 0.3% 2.3% -0.3% 0.0% 1.0% 1.0% 0.8% 0.0% -2.3% 1.3% 2.6% 4.0%

Offshore Billing Rate Growth % -4.2% 0.3% -2.2% 4.2% 2.5% 2.8% 0.1% 0.0% 0.1% 0.5% 0.2% 0.0% -6.5% 6.9% 1.3% 2.8%

Sequential Growth (%)

Revenue -4 % 3 % 0 % 3 % 1 % 5 % 0 % 2 % 3 % 3 % 0 % 1 % - - - -

Employee Benefit Expenses 6 % 3 % 2 % 2 % 1 % 8 % -3 % 1 % 3 % 5 % -1 % 1 % - - - -

EBITDA -35 % 7 % -7 % 3 % -9 % 14 % 10 % 13 % 2 % -15 % 17 % 10 % - - - -

EBIT -42 % 7 % -8 % -5 % -3 % 17 % 11 % 18 % 3 % -18 % 21 % 12 % - - - -

Recurring PAT -48 % 2 % -15 % 13 % -1 % 14 % 3 % 19 % 1 % -16 % 17 % 12 % - - - -

EPS -48 % 2 % -15 % 13 % -1 % 14 % 3 % 19 % 1 % -16 % 17 % 12 % - - - -

Yearly Growth (%)

Revenue 6 % 2 % 2 % 2 % 8 % 10 % 10 % 9 % 10 % 7 % 8 % 7 % 3 % 9 % 8 % 8 %

EBITDA 20 % -20 % -28 % -34 % -7 % -1 % 17 % 28 % 44 % 8 % 15 % 12 % -20 % 9 % 19 % 21 %

EBIT 22 % -27 % -35 % -46 % -10 % -1 % 20 % 49 % 57 % 10 % 20 % 14 % -27 % 14 % 23 % 25 %

Recurring PAT 30 % -24 % -35 % -49 % -4 % 7 % 30 % 37 % 40 % 2 % 17 % 10 % -27 % 17 % 16 % 27 %

EPS 30 % -24 % -35 % -49 % -4 % 7 % 30 % 37 % 40 % 2 % 17 % 10 % -27 % 17 % 16 % 27 %

Margin (%)

EBITDA 11 % 11 % 10 % 10 % 9 % 10 % 11 % 12 % 12 % 10 % 12 % 13 % 11 % 10 % 11 % 13 %

EBIT 8 % 9 % 8 % 7 % 7 % 8 % 9 % 10 % 10 % 8 % 10 % 11 % 8 % 8 % 10 % 11 %

PBT 9 % 9 % 7 % 7 % 8 % 9 % 9 % 10 % 10 % 8 % 10 % 11 % 8 % 9 % 10 % 12 %

PAT 7 % 7 % 6 % 6 % 6 % 7 % 7 % 8 % 8 % 6 % 7 % 8 % 6 % 7 % 7 % 9 %



Consolidated Financials P&L (Rs Mn) FY17A FY18E FY19E FY20E

Balance Sheet (Rs Mn) FY17A FY18E FY19E FY20E

Cash Flow (Rs Mn) FY17A FY18E FY19E FY20E

Revenue 33,200 36,310 39,211 42,170 Equity Capital 376 377 377 377 PBT 2,385 3,216 3,854 4,883

Op. Expenditure 29,714 32,508 34,703 36,707 Reserve 15,465 17,521 19,844 22,893 Depreciation 827 777 778 813

EBITDA 3,486 3,802 4,508 5,463 Networth 15,841 17,898 20,221 23,270 Others 805 17 0 0

Depreciation 827 777 778 813 Long Term Debt 3,334 3,760 3,460 3,160 Taxes Paid 670 731 964 1,221

EBIT 2,660 3,025 3,730 4,651 Def Tax Liability 579 0 0 0 Change in WC -1,717 -553 -214 -622

Interest Expense 136 113 143 131 Minority Interest 0 0 0 0 Operating C/F 1,630 2,727 3,454 3,853

Other Income 207 305 267 363 Account Payables 1,311 1,578 1,772 1,890 Capex -1,877 -1,047 -1,147 -1,247

PBT 2,730 3,216 3,854 4,883 Other Curr Liabi 4,148 4,272 4,613 4,961 Change in Invest -703 0 0 0

Tax 606 731 964 1,221 Total Liabilities & Equity 25,213 27,508 30,066 33,282 Others 97 0 0 0

PAT bef. MI &

Assoc. 2,125 2,486 2,891 3,662 Net Fixed Assets 8,085 8,354 8,722 9,081 Investing C/F -2,483 -1,047 -1,147 -1,247

Minority Interest 0 0 0 0 Capital WIP 0 0 0 0 Change in Debt -324 426 -300 -300

Profit from Assoc. 0 0 0 0 Others 2,498 2,498 2,498 2,573 Change in Equity 28 76 0 0

Recurring PAT 2,125 2,486 2,891 3,662

Inventory 433 474 512 551 Others 1,096 -1,101 -567 -613

Extraordinaires -261 -17 0 0 Account Receivables 7,843 8,058 8,594 9,243 Financing C/F 801 -599 -867 -913

Reported PAT 2,385 2,503 2,891 3,662 Other Current Assets 2,453 3,142 3,318 3,719 Net change in cash -51 1,081 1,440 1,694

FDEPS (Rs) 11.3 13.2 15.3 19.4 Cash 3,902 4,982 6,422 8,116 RoE (%) 14 % 15 % 15 % 17 %

DPS (Rs) 2.2 2.3 2.5 2.7 Total Assets 25,214 27,508 30,066 33,282

RoIC (%) 12 % 12 % 13 % 15 %

CEPS (Rs) 15.7 17.3 19.5 23.7 Non-cash Working Capital 5,271 5,824 6,039 6,661

Core RoIC (%) 14 % 14 % 16 % 19 %

FCFPS (Rs) -4.0 9.4 12.8 14.3 Cash Conv Cycle 57.9 58.5 56.2 57.6 Div Payout (%) 22 % 21 % 20 % 17 %

BVPS (Rs) 84.3 94.9 107.2 123.4 WC Turnover 6.3 6.2 6.5 6.3 P/E 19.3 16.5 14.2 11.2

EBITDAM (%) 11 % 10 % 11 % 13 % FA Turnover 4.1 4.3 4.5 4.6 P/B 2.6 2.3 2.0 1.8

PATM (%) 6 % 7 % 7 % 9 % Net D/E 0.0 -0.1 -0.1 -0.2 P/FCFF -54.9 23.2 17.0 15.2

Tax Rate (%) 22 % 23 % 25 % 25 % Revenue/Capital

Employed 1.9 2.0 1.9 1.9 EV/EBITDA 12.4 11.1 9.0 7.0

Sales Growth (%) 3 % 9 % 8 % 8 %

Capital Employed/Equity 1.3 1.2 1.2 1.2

EV/Sales 1.3 1.2 1.0 0.9

FDEPS Growth (%) -27 % 17 % 16 % 27 %

Dividend Yield (%) 1.0 % 1.1 % 1.1 % 1.2 %

TTM P/E vs. 2 yr forward EPS growth

TTM P/B vs. 2 yr forward RoE



Historical Consolidated Financials

P&L (Rs Mn) FY14A FY15A FY16A FY17A

Balance Sheet (Rs Mn) FY14A FY15A FY16A FY17A

Cash Flow (Rs Mn) FY14A FY15A FY16A FY17A

Revenue 26,940 29,899 32,243 33,200 Equity Capital 388 376 376 376 PBT 3,430 2,485 2,809 2,385

Op. Expenditure 22,758 26,655 27,901 29,714 Reserve 12,363 12,585 13,479 15,465 Depreciation 540 851 691 827

EBITDA 4,183 3,244 4,342 3,486 Networth 12,751 12,962 13,854 15,841 Others 81 -31 2,181 805

Depreciation 540 851 691 827 Long Term Debt 4,390 4,457 2,226 3,334 Taxes Paid 1,291 777 816 670

EBIT 3,643 2,393 3,651 2,660 Def Tax Liability 233 423 516 579 Change in WC -1,730 365 -766 -1,717

Interest Expense 258 260 165 136 Minority Interest 0 0 0 0 Operating C/F 1,030 2,894 4,100 1,630

Other Income 45 352 282 207 Account Payables 1,021 1,308 1,184 1,311 Capex -684 -906 -1,237 -1,877

PBT 3,430 2,485 3,767 2,730 Other Curr Liabi 2,839 3,551 4,051 4,148 Change in Invest -1,379 -311 -278 -703

Tax 941 115 845 606 Total Liabilities & Equity 21,234 22,701 21,832 25,213 Others -62 -684 204 97

PAT bef. MI & Assoc. 2,490 2,370 2,922 2,125 Net Fixed Assets 8,132 7,382 6,662 8,085 Investing C/F -2,125 -1,901 -1,311 -2,483

Minority Interest 0 0 0 0 Capital WIP 23 34 0 0 Change in Debt -129 -577 608 -324

Profit from Assoc. 0 0 0 0 Others 1,182 2,136 2,388 2,498 Change in Equity 119 112 -76 28

Recurring PAT 2,490 2,370 2,922 2,125 Inventory 34 229 380 433 Others 797 51 -3,596 1,096

Extraordinaires 0 0 113 -261 Account Receivables 6,743 6,979 6,861 7,843 Financing C/F 787 -414 -3,064 801

Reported PAT 2,490 2,370 2,809 2,385 Other Current Assets 1,471 1,714 1,588 2,453 Net change in cash -308 579 -275 -51

EPS (Rs) 13.2 12.6 15.5 11.3 Cash 3,649 4,228 3,953 3,902

RoE (%) 22 % 18 % 22 % 14 %

DPS (Rs) 1.1 1.1 1.1 2.2

Total Assets 21,234 22,701 21,832 25,214

RoIC (%) 17 % 15 % 18 % 12 %

CEPS (Rs) 15.9 16.8 19.2 15.7 Non-cash Working Capital 4,388 4,062 3,593 5,271 Core RoIC (%) 21 % 16 % 21 % 14 %

FCFPS (Rs) -4.8 6.5 15.5 -4.0 Cash Conv Cycle 59.5 49.6 40.7 57.9 Div Payout (%) 10 % 11 % 9 % 22 %

BVPS (Rs) 65.7 68.9 73.8 84.3 WC Turnover 6.1 7.4 9.0 6.3

P/E 16.5 17.3 14.1 19.3

EBITDAM (%) 16 % 11 % 13 % 11 % FA Turnover 3.3 4.0 4.8 4.1 P/B 3.3 3.2 3.0 2.6

PATM (%) 9 % 8 % 9 % 6 % Net D/E 0.1 0.0 -0.1 0.0 P/FCFF -45.8 33.7 14.1 -54.9

Tax Rate (%) 27 % 5 % 22 % 22 % Revenue/Capital Employed 2.2 1.9 1.8 1.9 EV/EBITDA 10.6 13.7 9.8 12.4

Sales growth (%) 20 % 11 % 8 % 3 %

Capital Employed/Equity 1.4 1.4 1.4 1.3

EV/Sales 1.7 1.5 1.3 1.3

FDEPS growth (%) 20 % -5 % 23 % -27 %

Dividend Yield (%) 0.5 % 0.5 % 0.5 % 1.0 %



Equirus Securities

Research Analysts Sector/Industry Email

Equity Sales E-mail

Abhishek Shindadkar IT Services [email protected] 91-22-43320643 Vishad Turakhia [email protected] 91-22-43320633

Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 Subham Sinha [email protected] 91-22-43320631

Depesh Kashyap Mid-Caps [email protected] 91-79-61909528 Sweta Sheth [email protected] 91-22-43320634

Devam Modi Power & Infrastructure [email protected] 91-79-61909516 Viral Desai [email protected] 91-22-43320635

Dhaval Dama FMCG, Mid-Caps [email protected] 91-79-61909518 Dealing Room E-mail

Manoj Gori Consumer Durables [email protected] 91-79-61909523 Ashish Shah [email protected] 91-22-43320662

Maulik Patel Oil and Gas [email protected] 91-79-61909519 Ilesh Savla [email protected] 91-22-43320666

Praful Bohra Pharmaceuticals [email protected] 91-79-61909532 Manoj Kejriwal [email protected] 91-22-43320663

Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Dharmesh Mehta [email protected] 91-22-43320661

Associates E-mail Sandip Amrutiya [email protected] 91-22-43320660

Ankit Choudhary [email protected] 91-79-61909533 Compliance Officer E-mail

Bharat Celly [email protected] 91-79-61909524 Jay Soni [email protected] 91-79-61909561

Harshit Patel [email protected] 91-79-61909522 Corporate Communications E-mail

Meet Chande [email protected] 91-79-61909513 Mahdokht Bharda [email protected] 91-22-43320647 Parva Soni [email protected] 91-79-61909521

Pranav Mehta [email protected] 91-79-61909514

Ronak Soni [email protected] 91-79-61909525

Samkit Shah [email protected] 91-79-61909520

Shreepal Doshi [email protected] 91-79-61909541

Varun Baxi [email protected] 91-79-61909527

Vikas Jain [email protected] 91-79-61909531

Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap > Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.

Registered Office:

Equirus Securities Private Limited

Unit No. 1201, 12th Floor, C Wing, Marathon Futurex,

N M Joshi Marg, Lower Parel,

Mumbai-400013.

Tel. No: +91 – (0)22 – 4332 0600

Fax No: +91- (0)22 – 4332 0601

Corporate Office:

3rd floor, House No. 9,

Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge,

S.G. Highway Ahmedabad-380054

Gujarat

Tel. No: +91 (0)79 - 6190 9550

Fax No: +91 (0)79 – 6190 9560

mailto:[email protected]




























© 2017 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not

be reprinted, sold or redistributed without the written consent of Equirus Securities Private Limited

Analyst Certification

I, Abhishek Shindadkar, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I

also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Disclosures

Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC176044 is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the

Capital Market (Reg. No. INB231301731), Futures & Options Segment (Reg. No.INF231301731) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB011301737) of Bombay Stock

Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH000001154), as a Portfolio Manager under SEBI (Portfolio Managers

Regulations, 1993 (Reg. No. INP000005216) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No. IN-DP-324-2017). There are no disciplinary actions taken by any regulatory

authority against ESPL. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to

merchant banking services, private equity, mergers & acquisitions and structured finance.

As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for

investment banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have

received a mandate from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, their

directors and employees may from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. ESPL and its associates collectively do not own (in

their proprietary position) 1% or more of the equity securities of the subject company mentioned in the report as the last day of the month preceding the publication of the research report. ESPL or its Analyst or

Associates did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ESPL nor

Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or

brokerage service transactions. ESPL has not been engaged in market making activity for the subject company.

The Research Analyst engaged in preparation of this Report:-

(a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months; (c)

has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products or

services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the subject

company or third party in connection with the research report; (f) might have served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the subject

company.

This document is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,

publication, availability or use would be contrary to law, regulation or which would subject ESPL and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein

may or may not be eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession of this document are required to inform themselves of, and to observe, such applicable

restrictions. Please delete this document if you are not authorized to view the same. By reading this document you represent and warrant that you have full authority and all rights necessary to view and read this

document without subjecting ESPL and affiliates to any registration or licensing requirement within such jurisdiction.

This document has been prepared solely for information purpose and does not constitute a solicitation to any person to buy, sell or subscribe any security. ESPL or its affiliates are not soliciting any action based on

this report. The information and opinions contained herein is from publicly available data or based on information obtained in good faith from sources believed to be reliable but ESPL provides no guarantee as to

its accuracy or completeness. The information contained herein is as on date of this report, and is subject to change or modification and any such changes could impact our interpretation of relevant information

contained herein. While we would endeavour to update the information herein on reasonable basis, ESPL and its affiliates, their directors and employees are under no obligation to update or keep the information

current. Also there may be regulatory, compliance, or other reasons that may prevent ESPL and its group companies from doing so. This document is prepared for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the

securities of companies referred to in this document including the merits and risks involved. This document is intended for general circulation and does not take into account the specific investment objectives,

financial situation or particular needs of any particular person. ESPL and its group companies, employees, directors and agents accept no liability, and disclaim all responsibility, for the consequences of you or

anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. ESPL/its affiliates do and seek to do business with companies covered in its

research report. Thus, investors should be aware that the firm may have conflict of interest.



A graph of daily closing prices of securities is available at http://www.nseindia.com/ChartApp/install/charts/mainpage.jsp and www.bseindia.com (Choose a company from the list on the browser and select the

“three years” period in the price chart).

Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest

Research Analyst‟ or Relatives‟ financial interest No

Research Analyst‟ or Relatives‟ actual/beneficial ownership of 1% or more No

Research Analyst‟ or Relatives‟ material conflict of interest No

Disclaimer for U.S. Persons

ESPL/its affiliates are not a registered broker–dealer under the U.S. Securities Exchange Act of 1934, as amended (the“1934 act”) and under applicable state laws in the United States. In addition Equirus is not a

registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the “Acts”), and under applicable state laws in the United States.

Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by Equirus, including the products and services described herein are not available to or intended

for U.S. persons. The information contained in this Report is not intended for any person who is a resident of the United States of America or a resident of any jurisdiction, the laws of which imposes prohibition on

soliciting the securities business in that jurisdiction without going through the registration requirements and/ or prohibit the use of any information contained in this report. This Report and its respective contents

do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S. Persons"

are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US Persons" under

certain rules.

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