kpittech-icicidirect-281015
DESCRIPTION
Idirect report on KPITTRANSCRIPT
October 27, 2015
ICICI Securities Ltd | Retail Equity Research
Result Update
Optimistic recovery… • KPIT reported a strong set of quarterly earnings in Q2FY16 • US$ revenues grew 5.3% QoQ to $124.6 million significantly above
our 1% QoQ growth and $119.5 million estimate • EBITDA margins improved 441 bps QoQ to 14%, above our 60 bps
decline and 9% estimate led by growth, improvement in people metrics, rupee, partially offset by the wage hike impact (200-225 bps)
• Reported PAT of | 75.1 crore was above our | 45 crore estimate led by revenue, margin beat
Optimistic recovery… KPIT reported a strong set of Q2FY16 earnings, which were better operationally as well. Dollar revenues grew 5.3% QoQ led by 1) recovery in top 10 customers (3.5% QoQ growth), 2) growth in products and platforms (P&P) (21.5%), SAP (9.9%) and product engineering services (PES, 9.2%) SBUs and 3) automotive (5.8%) and energy & utilities (19.8%) businesses. As highlighted in the previous quarter, KPIT expects marginal growth in both topline and bottomline in FY16E relative to FY15. The management has highlighted four key factors that could improve revenue and margin trajectory, going ahead, 1) profitability – pyramid correction as KPIT targets 70% gross recruits to be freshers, improve utilisation and productivity, tail accounts rationalisation, 2) people development – focused training to align employees’ skill sets with their respective SBUs and devise a clear career progression plan, 3) growth – increasing investments in newer technologies (digital, IMS, Internet of Things) and hiring subject matter experts, sales and account management personnel, and 4) predictability. Adjusting estimates to account for margin beat… Though we maintain our revenue growth estimate, we are adjusting margin assumption, led by H1 beat leading to revision in EPS estimate. We now expect FY16E margins to expand 110 bps YoY to 12% (10 bps, 11% earlier). We also raise our FY17E margin assumption to 12% vs. 11.5% earlier as the management reiterated that the margin improvement trajectory could continue led by operational efficiency (freshers replacing middle level employees), utilisation improvements (onsite utilisation was up 413 bps to 91.2% while offshore was up 334 bps to 69.6%), rupee and rationalisation of tail accounts. Top account recovery aids performance… Large client revenue growth recovered in Q2. Top customer revenues revenue grew 5.4% QoQ (down 8.2%, 0.8%, 1.1% QoQ in Q1FY16, Q4, Q3FY15, respectively) but declined 5.1% YoY. Top 6-10 grew 8% QoQ vs. 3.5% decline while top 2-5 customer revenues declined 1.2% QoQ vs. 5.9% growth in Q1. Note that top customer revenues declined 0.6% YoY in FY15, top 2-5 clients saw a considerable decline of 15% YoY while top 6-10 grew a healthy 31% YoY. Raising estimates and target price… We estimate KPIT will report rupee revenue, earnings CAGR of 10%, 8.7% (5% earlier) in FY15-17E (average 12% EBITDA margins in FY16-17E, 11.3% earlier), vs. 33%, 23% reported during FY10-15 (average 15.7%), respectively, driven by weakness in select business units and uneven margin profile in SAP SBU. We now value the stock at 9.5x (8x) FY17E EPS estimate of | 14 (| 13) and raise our target price to | 135 (| 105). Higher multiple is to account for recovery in growth, margin trajectory.
KPIT Technologies (KPISYS) | 137 Rating matrix
Rating : HoldTarget : | 135Target Period : 12 monthsPotential Upside : -1%
What’s changed?
Target Changed from | 105 to | 135EPS FY16E Changed from |10.9 to | 12.5EPS FY17E Changed from |13 to | 14Rating Unchanged
Quarterly performance
Q2FY16 Q2FY15 YoY (%) Q1FY16 QoQ (%)Revenue 812 757 7.2 758 7.1 EBITDA 114 101 12.7 73 56.3 EBITDA (%) 14.0 13.3 68 bps 9.6 442 bpsPAT 75 71 6.4 44 69.1
Key financials
| Crore FY14 FY15E FY16E FY17ENet Sales 2,694 2,990 3,262 3,588 EBITDA 423 327 392 430 Net Profit 249 237 250 280 EPS (|) 13.0 11.9 12.5 14.0
Valuation summary
FY14 FY15E FY16E FY17EP/E 10.6 11.5 11.0 9.8 Target P/E 10.4 11.4 10.8 9.6 EV / EBITDA 6.6 8.3 6.6 5.6 P/BV 2.1 2.0 1.7 1.5 RoNW (%) 19.5 17.0 15.4 14.9 RoCE (%) 20.8 14.7 17.4 17.4
Stock data Particular AmountMarket Capitalization (| Crore) 2,617.6
Total Debt (Sept-15) (| Crore) 447.8 Cash and Investments (Sept-15) (| Crore) 440.2
EV (| Crore) 2,625.2 52 week H/L 232 / 85
Equity capital 38.2 Face value 2.0
Price performance
1M 3M 6M 12M
TechMahindra (6.1) (16.7) (26.8) (0.7) MindTree (6.6) 3.2 (10.0) 46.0 KPIT Tech 7.2 (30.7) (50.5) (41.6) NIIT Tech 22.8 33.3 31.9 20.8
Research Analysts
Abhishek Shindadkar [email protected]
ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis Q2FY16 Q2FY16E Q2FY15 YoY (%) Q1FY16 QoQ (%) Comments
Revenue 812.3 776.0 757.4 7.2 758.3 7.1Revenue growth led by growth in top accounts products and platforms, SAP, product engineering services SBUs
Employee expenses 551.4 562.6 532.4 3.6 545.4 1.1
Gross Margin 260.8 213.4 225.1 15.9 212.9 22.5Gross margin (%) 32.1 27.5 29.7 240 bps 28.1 403 bps Gross margin improvement led by employee rationalisation effortsSG&A expenses 146.9 143.6 124.0 18.5 140.1 4.9
EBITDA 113.9 69.8 101.0 12.7 72.9 56.3EBITDA Margin (%) 14.0 9.0 13.3 68 bps 9.6 441 bps Gross margin improvement leads to EBITDA margin expansionDepreciation & amortisation 16.7 17.1 24.5 -31.6 16.4 2.1EBIT 97.1 52.8 76.6 26.9 56.5 72.0EBIT Margin (%) 12.0 6.8 10.1 185 bps 7.4 451 bpsOther income (less interest) 3.6 9.7 0.3 1,023.7 5.1 -29.7PBT 100.7 62.5 76.9 31.0 61.6 63.6Tax paid 25.6 17.5 6.3 NM 17.2 NMPAT 75.1 45.0 70.6 6.4 44.4 69.1 PAT was above our estimates led by revenue, margin beat
Key MetricsClosing employees 10,659 10,900 9,933 7.3 10,839 -1.7 Headcount declined 180 QoQ over 141 decline reported in Q1Overall utilisation (%) 74.0 71.0 75.5 -150 bps 70.4 353 bps Utilisation jump led by pyramid correctionAverage $/| 65.2 64.9 60.6 7.6 64.1 1.7
Source: Company, ICICIdirect.com Research Change in estimates
FY16E FY17E(| Crore) Old New % Change Old New % Change Comments
Revenue 3,262 3,262 0.0 3,588 3,588 0.0 Revenue growth could likely be muted in FY16E led by soft H1EBITDA 359 392 9.2 413 430 4.2EBITDA Margin (%) 11.0 12.0 100 bps 11.5 12.0 50 bps Margin expansion to be driven by operational efficiency and pyramid correctionPAT 217 250 15.2 259 280 8.0EPS (|) 10.9 12.5 15.2 13.0 14.0 8.0
Source: Company, ICICIdirect.com Research Assumptions
FY14 FY15 FY16E FY17E FY16E FY17EClosing employees 9,296 10,980 12,280 13,680 12,280 13,680 Management targets 70% of gross recruits to be freshers in FY16E Overall utilisation (%) 76.0 73.4 70.9 72.8 70.9 72.8Average $/| 60.6 61.1 63.5 63.5 63.5 63.5
Current Earlier
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3
Company Analysis Operating highlights Quarterly growth was led by volumes – onsite grew ~5% while offshore grew 3.8% leading to blended growth of ~4% – likely helped by price realisations. Sequentially, P&P grew 21.5%, followed by SAP and PES with 9.4% and 9.2%, respectively. Integrated Enterprise Solutions (IES) declined 0.1% QoQ (vs. 2.5% decline in Q1) while enterprise solutions (ES) declined 0.5% vs. 7.4% growth in Q1. From a geography perspective, there was broad based growth with Europe and APAC growing 14.7% and 14.5%, respectively, followed by the US with 1.2% growth. The management commentary suggests that investments in developing capabilities in engineering, digital, IoT and IMS have started yielding results as it sees traction across these offerings both in terms of deal wins as well as pipeline. Margins rise led by operational levers… EBITDA margins improved 441 bps QoQ to 14% vs. 9.5% in Q1 and were above our 9% estimate, led by growth, improvement in people metrics (utilisation, people pyramid, span of control at the middle level) and rupee, partially offset by the wage hike impact of 200-225 bps. SAP business margins continue to be volatile but could stabilise as maintenance revenue contribution rises. Recall, SAP business margins turned negative in Q4, a sharp reversal from the healthy recovery in the Q3 (8%), Q2 (~4.5-5%) and Q1 (break-even). Exhibit 1: Margins improve ~950 bps from lows of 4.5% in Q4FY15
22.1
14.9 14.516.3 15.7
12.113.3 13.9
4.5
10.99.6
14.012.0 12.0
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Source: Company, ICICIdirect.com Research
Adjusting estimates to account for margin beat… Though we maintain our revenue growth estimate, we are adjusting margin assumption, led by H1 beat, leading to a revision in EPS estimate. We now model FY16E margins could expand 110 bps YoY to 12% (10 bps, 11% earlier). We also raise our FY17E margin assumption to 12% vs. 11.5% earlier as the management reiterated that the margin improvement trajectory could continue led by operational efficiency (freshers replacing middle level employees), utilisation improvements (onsite utilisation was up 413 bps to 91.2% while offshore was up 334 bps to 69.6%), rupee and rationalisation of tail accounts.
ICICI Securities Ltd | Retail Equity Research Page 4
Exhibit 2: Dollar revenue may grow at 7.5% CAGR in FY15-17E
154
224
309
410444
115 125 126 122
489
118 125
514565
-11.7
11.415.3
10.0
45.7 38.0
32.7
8.3 5.9
7.7 10.12.7 -0.3
5.0
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Source: Company, ICICIdirect.com Research
Exhibit 3: KPIT growth vs. Nasscom guidance – KPIT may likely underperform industry average growth in FY16E
19.9
-11.7
45.738.0
32.7
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Source: Company, ICICIdirect.com Research
Top account recovery aids performance… Large client revenue growth recovered in Q2. Top customer revenue grew 5.4% QoQ (down 8.2%, 0.8%, 1.1% QoQ in Q1FY16, Q4, Q3FY15, respectively) but declined 5.1% YoY. Top 6-10 grew 8% QoQ vs. 3.5% decline while top 2-5 customer revenues declined 1.2% QoQ vs. 5.9% growth in Q1. Note, top customer declined 0.6% YoY in FY15, top 2-5 clients saw a considerable decline of 15% YoY while top 6-10 grew a healthy 31% YoY. Client metric was steady in Q2 as clients contributing >$1 million increased by one vs. decline of three in Q1. Note, KPIT had added 10 customers to >$1 million category in FY15 and 55 since FY10 largely due to acquisitions.
ICICI Securities Ltd | Retail Equity Research Page 5
Exhibit 4: Company adds 56 clients to $1 million+ category since FY10
3240
59
78 80 83 84 87 90 90 87 88
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FY10 FY11 FY12 FY13 FY14 Q1 Q2 Q3 Q4 FY15 Q1 Q2
$1 million+ clients
Source: Company, ICICIdirect.com Research
Utilisation improvement continues… Onsite and offshore utilisation improved 413 bps (130 bps in Q1) and 334 bps (81 bps) during the quarter to 91.2% (87.1%) and 69.8% (66.4%), respectively. Note, Q4 utilisation was impacted by volume de-growth and higher net additions and led to management initiating multiple actions to improve utilisation and productivity, which were margin levers in the quarter. Exhibit 5: Utilisation improvement led by pyramid correction; could be margin lever in FY16E
74.2
71.6
75.6
77.676.0
74.475.5
74.1
69.5
73.4
70.4
74.0
70.9
72.8
65
68
71
74
77
80
FY10
FY11
FY12
FY13
FY14 Q1 Q2 Q3 Q4
FY15 Q1 Q2
FY16
E
FY17
E
%
Overall utilisation
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 6
Outlook and valuation KPIT reported a strong set of quarterly earnings in Q2FY16 led by growth in products and platforms, SAP, product engineering services SBUs and automotive, energy & utilities business. The management has highlighted four key factors that could improve revenue and margin trajectory, going ahead, profitability, people development, growth and predictability. However, execution has to be flawless and consistent to regain investor confidence. We estimate KPIT will report rupee revenue, earnings CAGR of 10%, 8.7% (5% earlier) in FY15-17E (average 12% EBITDA margins in FY16-17E, 11.3% earlier), vs. 33%, 23% reported during FY10-15 (average 15.7%), respectively, driven by weakness in select business units and uneven margin profile in SAP SBU. We now value the stock at 9.5x (8x) FY17E EPS estimate of | 14 (| 13) and raise our target price to | 135 (| 105). Higher multiple is to account for recovery in growth, margin trajectory. Exhibit 6: One year forward rolling PE chart
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Source: Company, ICICIdirect.com Research
Exhibit 7: Valuations
Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE (| cr) (%) (|) (%) (x) (x) (%) (%)
FY14 2,694 20.3 13.0 22.8 10.6 6.6 19.5 20.8 FY15E 2,990 11.0 11.9 (8.3) 11.5 8.3 17.0 14.7 FY16E 3,262 9.1 12.5 5.3 11.0 6.6 15.4 17.4 FY17E 3,588 10.0 14.0 12.0 9.8 5.6 14.9 17.4
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 7
Company snapshot
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Target price : | 135
Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Event
Oct-10 Announces it has completed the merger of German vehicle diagnostics and telematics specialist In2Soft Gmbh
May-11 Enters into a definitive agreement to take 50% stake in SYSTIME, world's largest JD Edwards solution provider
Apr-12 In Q4FY12, reports eighth consecutive quarter of best-in-the-industry growth rate (30% QoQ). Guides for 35% dollar revenue growth for FY13E
Jan-13 Reports flat QoQ dollar revenue growth during Q3FY13 and maintains its annual guidance for FY13
Apr-13 During Q4FY13, dollar revenues grow 2% QoQ against a difficult macro environment and guides for 14-16% dollar growth during FY14E
Jun-13 Acquires the consulting and services business of Baltimore, MD-based Learn2Perform (L2P), to expand in the Human Capital Management (HCM)
Sep-13 Unveils its new brand and visual identity with a new logo and name, KPIT Technologies Ltd, as part of rebranding initiative
Jan-14 Reports a 2.3% QoQ decline led by weakness in SAP business and likely to miss its FY14E guidance of 14-16%
Jul-14 Guides for 12-14% dollar revenue growth with at least 17% margins for FY15E though achieving it becomes challenging post a weaker Q1
Sep-14 Acquires Bharat Forge's 50% stake in Impact Automotive JV for | 10.8 crores. The JV was formed to manufacture hybrid solutions for automotives
Apr-15Reports disappointing Q4FY15 earnings as revenues decline 3.2% QoQ while EBITDA margins decline 940 bps to 4.5%. Growth and margins may remain muted in FY16E
Jul-14 Reports mixed set of Q1FY16 earnings as $ revenues declined 3.3% QoQ while margins improve 510 bps QoQ to 9.5%
Oct-15 Reports strong Q2FY16 earnings as revenues grow 5.3% QoQ while EBITDA margins improved 441 bps to 14%.
Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m)1 Nuvo ChrysCapital Advisors Pvt. Ltd. 30-Jun-15 13.80 27.3 0.02 Proficient Finstock, L.L.P. 5-Aug-15 12.27 24.2 1.13 Ruane, Cunniff & Goldfarb, Inc. 30-Jun-15 8.28 16.4 6.34 Fidelity Management & Research Company 30-Jun-15 4.56 9.0 -0.65 KPIT Systems Employees Welfare Trust 30-Jun-15 4.38 8.7 0.16 CX Advisors LLP 30-Jun-15 2.57 5.1 0.07 Grandeur Peak Global Advisors, LLC 30-Apr-15 2.00 4.0 -0.28 Patil (Kishore P) 5-Aug-15 1.94 3.8 -1.19 DSP BlackRock Investment Managers Pvt. Ltd. 30-Jun-15 1.87 3.7 -1.510 Norges Bank Investment Management (NBIM) 30-Jun-15 1.83 3.6 -0.6
(in %) Sep-14 Dec-14 Mar-15 Jun-15 Sep-15Promoter 22.22 21.78 21.67 21.68 22.31FII 45.81 33.61 31.17 29.16 30.10DII 8.02 8.93 11.18 7.73 5.64Others 23.95 35.68 35.98 41.43 41.95
Source: Reuters, ICICIdirect.com Research Recent Activity
Investor name Value Shares Investor name Value SharesRuane, Cunniff & Goldfarb, Inc. 9.19m 6.28m CX Securities, Ltd. -17.71m -5.29m Capital Research Global Investors 3.89m 2.66m Reliance Capital Asset Management Ltd. -3.77m -2.57m Proficient Finstock, L.L.P. 1.74m 1.13m Morgan Stanley Investment Management Inc. (US) -2.46m -1.59m Kulkarni (Anil Gajanan) 0.82m 0.32m DSP BlackRock Investment Managers Pvt. Ltd. -2.20m -1.50m The Vanguard Group, Inc. 0.49m 0.30m Patil (Kishore P) -1.73m -1.12m
Buys Sells
Source: Reuters ICICIdirect com Research
ICICI Securities Ltd | Retail Equity Research Page 8
.
Financial summary Profit and loss statement | Crore
FY14 FY15E FY16E FY17E
Total Revenues 2,694 2,990 3,262 3,588
Growth (%) 20.3 11.0 9.1 10.0
COGS 1,818.0 2,147.3 2,299.1 2,544.8
SG&A expenses 452.8 515.5 570.8 613.6
EBITDA 423 327 392 430
Growth (%) 15.8 (22.7) 19.8 9.7
Depreciation 54.0 85.1 70.0 78.9
Other Income (7.4) 35.1 38.0 45.0
Interest 28.6 28.6 22.0 18.0
PBT before Exceptional Items 343.0 248.5 338.0 378.0
Growth (%) 19.9 (27.6) 36.0 11.8
Tax 94.1 11.5 87.9 98.0
PAT before Exceptional Items 249.0 237.0 250.0 280.0
Exeptional items - - - -
PAT before MI 249.0 237.0 250.0 280.0
Minority Int & Pft. from associates - - - -
PAT 249 237 250 280
Growth (%) 25.1 (4.8) 5.5 12.0
EPS 13.0 11.9 12.5 14.0
EPS (Growth %) 22.8 (8.3) 5.3 12.0
Source: Company, ICICIdirect.com Research
Cash flow statement | Crore FY14 FY15E FY16E FY17E
Profit before Tax 343 248 338 378
Depreciation 54 85 70 79
(inc)/dec in Current Assets (160) (125) (102) (116)
(inc)/dec in current Liabilities 32 83 (20) 64
CF from operations 103 226 208 257
Other Investments (116) 150 38 45
(Purchase)/Sale of Fixed Assets (68) (100) (85) (90)
CF from investing Activities (191) 50 (47) (45)
Inc / (Dec) in Equity Capital 8 - - -
Inc / (Dec) in sec.loan Funds 105 6 (50) (50)
Dividend & Divendend tax (20) (24) (22) (27)
Interest Paid on Loans (18) (29) (22) (18)
CF from Financial Activities 79 (47) (94) (95)
Net change in cash (9) 229 67 117
Other adjustments - - - -
Closing cash 191 420 487 604
Source: Company, ICICIdirect.com Research
Balance sheet | Crore
FY14 FY15E FY16E FY17E
Equity 39 39 39 39
Reserves & Surplus 1,237 1,358 1,586 1,839
Networth 1,275 1,397 1,624 1,878
Minority Interest - - - -
Other liabilities 23 42 46 50
Loans 439 445 395 345
Source of funds 3,013 3,280 3,689 4,151
Gross Block 530 630 715 805
Acc.dep 317 402 472 551
Net Block 214 229 244 255
CWIP 2 2 2 2
Investments (long term) 12 12 12 12
Investments (short term) 174 59 59 59
Goodwill 599 508 508 508
Inventories 3 23 23 23
Debtors 674 702 746 847
Cash & Cash equivalents 191 420 487 604
Loans and advances 74 90 98 108
Other current assets 73 81 88 97
Trade payables 102 127 123 152
Current liabilities 226 254 228 251
Provisions 58 69 75 83
Application of funds 3,013 3,280 3,689 4,151
Source: Company, ICICIdirect.com Research
Key ratios FY14 FY15E FY16E FY17E
Per share data (|)
EPS 13.0 11.9 12.5 14.0
BV 66.3 70.0 81.2 93.9
DPS 1.1 1.1 1.0 1.2
Cash Per Share 9.9 21.0 24.3 30.2
Operating Ratios (%)
EBITDA Margin 15.7 10.9 12.0 12.0
PAT Margin 9.2 7.9 7.7 7.8
Debtor days 91 86 83 86
Creditor days 14 16 14 15
Return Ratios (%)
RoE 19.5 17.0 15.4 14.9
RoCE 20.8 14.7 17.4 17.4
RoIC 55.6 35.3 41.1 41.1
Valuation Ratios (x)
P/E 10.6 11.5 11.0 9.8
EV / EBITDA 6.6 8.3 6.6 5.6
Market Cap / Sales 1.0 0.9 0.8 0.8
Price to Book Value 2.1 2.0 1.7 1.5
Solvency Ratios
Debt / Equity 0.3 0.3 0.2 0.2
Debt / EBITDA 1.0 1.4 1.0 0.8
Current Ratio 2.1 2.0 2.2 2.2
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 9
ICICIdirect.com coverage universe (IT) CMP M Cap(|) TP(|) Rating (| Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E
Cyient (INFENT) 550 500 Hold 6,181 31.4 34.0 40.0 17.5 16.2 13.7 13.5 11.0 8.6 22.2 21.9 22.4 19.2 18.1 18.6Eclerx (ECLSER) 1,870 1,500 Sell 5,700 74.3 99.0 110.0 25.2 18.9 17.0 15.1 11.7 9.9 40.4 45.8 43.5 32.1 35.5 33.2Firstsource (FIRSOU) 32 45 Buy 2,168 3.3 4.2 5.1 9.7 7.8 6.4 7.3 5.8 4.4 9.5 11.6 14.1 11.2 12.2 12.9HCL Tech* (HCLTEC) 859 1,050 Buy 120,838 51.4 55.0 64.0 16.7 15.6 13.4 12.5 11.0 9.0 35.2 31.7 30.5 29.3 25.7 24.7Infosys (INFTEC) 1,147 1,300 Buy 263,505 53.9 57.0 65.0 21.3 20.1 17.6 14.9 13.4 11.4 31.4 29.7 30.1 22.5 21.3 21.7KPIT Tech (KPISYS) 136 135 Hold 2,681 11.9 12.5 14.0 11.5 10.9 9.7 8.3 6.6 5.6 14.7 17.4 17.4 17.0 15.4 14.9Mindtree (MINCON) 1,529 1,450 Buy 12,818 63.9 73.0 93.0 23.9 20.9 16.4 13.8 11.5 9.1 33.7 32.2 33.7 26.6 25.3 26.4NIIT Technologies (NIITEC) 573 525 Hold 3,502 31.8 42.0 47.5 18.0 13.7 12.1 8.2 5.9 4.9 23.4 29.8 31.9 14.3 16.6 16.6Persistent (PSYS) 674 715 Hold 5,392 36.3 45.0 51.0 18.5 15.0 13.2 11.7 8.9 7.3 27.5 28.7 27.4 20.7 21.2 20.2TCS (TCS) 2,537 2,800 Buy 499,957 110.8 119.0 130.0 22.9 21.3 19.5 17.2 15.2 13.4 81.8 77.3 74.6 42.8 36.1 31.9Tech Mahindra (TECMAH) 537 600 Buy 51,721 26.7 29.0 36.0 20.1 18.5 14.9 11.8 11.6 9.3 26.9 24.9 26.5 21.5 19.4 20.4Wipro (WIPRO) 569 680 Buy 140,577 35.1 37.0 40.5 16.2 15.4 14.1 11.6 10.4 9.1 23.0 22.6 22.4 21.2 19.7 19.1
RoE (%)Sector / Company
EPS (|) P/E (x) EV/EBITDA (x) RoCE (%)
* June year end, Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 10
RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
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ANALYST CERTIFICATION We /I, Abhishek Shindadkar, MBA, Research Analyst, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
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Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. It is confirmed that Abhishek Shindadkar, MBA, Research Analyst of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. 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