Result Update

October 27, 2015

Rating matrix
Rating
Target
Target Period
Potential Upside

:
:
:
:

KPIT Technologies (KPISYS)

Hold
| 135
12 months
-1%

Optimistic recovery

Whats changed?
Target
EPS FY16E
EPS FY17E
Rating

Changed from | 105 to | 135

Changed from |10.9 to | 12.5
Changed from |13 to | 14
Unchanged

Quarterly performance
Revenue
EBITDA
EBITDA (%)
PAT

Q2FY16
812
114
14.0
75

Q2FY15
757
101
13.3
71

YoY (%)
7.2
12.7
68 bps
6.4

Q1FY16 QoQ (%)

758
7.1
73
56.3
9.6 442 bps
44
69.1

Key financials
| Crore
Net Sales
EBITDA
Net Profit
EPS (|)

FY14
2,694
423
249
13.0

FY15E
2,990
327
237
11.9

FY16E
3,262
392
250
12.5

FY17E
3,588
430
280
14.0

FY15E
11.5
11.4
8.3
2.0
17.0
14.7

FY16E
11.0
10.8
6.6
1.7
15.4
17.4

FY17E
9.8
9.6
5.6
1.5
14.9
17.4

Valuation summary
P/E
Target P/E
EV / EBITDA
P/BV
RoNW (%)
RoCE (%)

FY14
10.6
10.4
6.6
2.1
19.5
20.8

Stock data
Particular
Market Capitalization (| Crore)
Total Debt (Sept-15) (| Crore)
Cash and Investments (Sept-15) (| Crore)
EV (| Crore)
52 week H/L
Equity capital
Face value

Amount
2,617.6
447.8
440.2
2,625.2
232 / 85
38.2
2.0

Price performance
TechMahindra
MindTree
KPIT Tech
NIIT Tech

| 137

1M

3M

6M

12M

(6.1)
(6.6)
7.2
22.8

(16.7)
3.2
(30.7)
33.3

(26.8)
(10.0)
(50.5)
31.9

(0.7)
46.0
(41.6)
20.8

Research Analysts
Abhishek Shindadkar
abhishek.shindadkar@icicisecurities.com

ICICI Securities Ltd | Retail Equity Research

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.

Variance analysis
Q2FY16 Q2FY16E Q2FY15

YoY (%)

Q1FY16 QoQ (%)

Revenue
Employee expenses

812.3
551.4

776.0
562.6

757.4
532.4

7.2
3.6

758.3
545.4

7.1
1.1

Gross Margin
Gross margin (%)
SG&A expenses

260.8
32.1
146.9

213.4
27.5
143.6

225.1
15.9
29.7 240 bps
124.0
18.5

212.9
22.5
28.1 403 bps
140.1
4.9

EBITDA
EBITDA Margin (%)
Depreciation & amortisation
EBIT
EBIT Margin (%)
Other income (less interest)
PBT
Tax paid
PAT

113.9
14.0
16.7
97.1
12.0
3.6
100.7
25.6
75.1

69.8
9.0
17.1
52.8
6.8
9.7
62.5
17.5
45.0

101.0
12.7
13.3 68 bps
24.5
-31.6
76.6
26.9
10.1 185 bps
0.3 1,023.7
76.9
31.0
6.3
NM
70.6
6.4

72.9
56.3
9.6 441 bps
16.4
2.1
56.5
72.0
7.4 451 bps
5.1
-29.7
61.6
63.6
17.2
NM
44.4
69.1

Key Metrics
Closing employees
10,659
Overall utilisation (%)
74.0
Average $/|
65.2
Source: Company, ICICIdirect.com Research

10,900
71.0
64.9

9,933
7.3
75.5 -150 bps
60.6
7.6

10,839
-1.7
70.4 353 bps
64.1
1.7

Comments
Revenue growth led by growth in top accounts products and platforms, SAP,
product engineering services SBUs

Gross margin improvement led by employee rationalisation efforts

Gross margin improvement leads to EBITDA margin expansion

PAT was above our estimates led by revenue, margin beat

Headcount declined 180 QoQ over 141 decline reported in Q1

Utilisation jump led by pyramid correction

Change in estimates
(| Crore)
Revenue
EBITDA
EBITDA Margin (%)
PAT
EPS (|)

Old
3,262
359
11.0
217
10.9

FY16E
New % Change
3,262
0.0
392
9.2
12.0 100 bps
250
15.2
12.5
15.2

Old
3,588
413
11.5
259
13.0

FY17E
New % Change
3,588
0.0
430
4.2
12.0
50 bps
280
8.0
14.0
8.0

Comments
Revenue growth could likely be muted in FY16E led by soft H1
Margin expansion to be driven by operational efficiency and pyramid correction

Source: Company, ICICIdirect.com Research

Assumptions

Closing employees
Overall utilisation (%)
Average $/|

FY14
9,296
76.0
60.6

FY15
10,980
73.4
61.1

Current
FY16E
FY17E
12,280 13,680
70.9
72.8
63.5
63.5

Earlier
FY16E
FY17E
12,280 13,680
70.9
72.8
63.5
63.5

Management targets 70% of gross recruits to be freshers in FY16E

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 2

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
25

22.1

20
14.9 14.5

16.3 15.7
12.1

14.0

13.3 13.9

10.9

15
10

9.6

12.0 12.0

4.5

FY17E

FY16E

Q2

Q1

FY15

Q4

Q3

Q2

Q1

FY14

FY13

FY12

FY11

FY10

EBITDA margin

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 3

Exhibit 2: Dollar revenue may grow at 7.5% CAGR in FY15-17E

45.7 38.0
32.7444
410

$ million

500
400

11.4

309

300
200

565

-11.7
154

8.3

50
40
30

15.3

10.0

7.7

224

514

489

10.1

5.9

2.7

115 125 126 122

-0.3

20
%

600

10

5.0

118 125

-10

100

Dollar revenue

FY17E

FY16E

Q2

Q1

FY15

Q4

Q3

Q2

Q1

FY14

FY13

FY12

FY11

FY10

-20

Growth, YoY

Source: Company, ICICIdirect.com Research

Exhibit 3: KPIT growth vs. Nasscom guidance KPIT may likely underperform industry average
growth in FY16E
45.7

50

38.0

40
30
%

20

19.9
16.0

18.7

16.5

5.5

10

32.7

10.2

13.0
8.3

13.0
10.1

FY14

FY15

13
5.0

0
-10
-11.7

-20
FY09

FY10

FY11
Growth, YoY

FY12

FY13

FY16E

NASSCOM guidance

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 4

Exhibit 4: Company adds 56 clients to $1 million+ category since FY10

100
80

84

87

90

80

83

90

87

88

78

FY13

FY14

Q1

Q2

Q3

Q4

FY15

Q1

Q2

59

60
40

32

40
20
0

FY10

FY11

FY12

$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
80
77

77.6

74

76.0

75.6

74.2

74.4

75.5

74.1

71.6

71

74.0

73.4
70.4

69.5

72.8
70.9

68

Overall utilisation

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 5

FY17E

FY16E

Q2

Q1

FY15

Q4

Q3

Q2

Q1

FY14

FY13

FY12

FY11

FY10

65

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
250
200

150
100
50

Price

14

11

PE
(x)
10.6
11.5
11.0
9.8

EV/EBITDA
(x)
6.6
8.3
6.6
5.6

RoNW
(%)
19.5
17.0
15.4
14.9

Oct-15

Apr-15

Oct-14

Apr-14

Oct-13

Apr-13

Oct-12

Apr-12

Oct-11

Apr-11

Oct-10

Apr-10

Oct-09

Apr-09

Oct-08

Apr-08

Oct-07

Apr-07

Source: Company, ICICIdirect.com Research

Exhibit 7: Valuations

FY14
FY15E
FY16E
FY17E

Sales
(| cr)
2,694
2,990
3,262
3,588

Growth
(%)
20.3
11.0
9.1
10.0

EPS
(|)
13.0
11.9
12.5
14.0

Growth
(%)
22.8
(8.3)
5.3
12.0

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 6

RoCE
(%)
20.8
14.7
17.4
17.4

Company snapshot
Target price : | 135

250

200

150

100

50

Oct-16

Jul-16

Apr-16

Jan-16

Oct-15

Jul-15

Apr-15

Jan-15

Oct-14

Jul-14

Apr-14

Jan-14

Oct-13

Jul-13

Apr-13

Jan-13

Oct-12

Jul-12

Apr-12

Jan-12

Oct-11

Jul-11

Apr-11

Jan-11

Oct-10

Jul-10

Apr-10

Jan-10

Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Date
Oct-10
May-11

Event
Announces it has completed the merger of German vehicle diagnostics and telematics specialist In2Soft Gmbh
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
Jul-14

Reports a 2.3% QoQ decline led by weakness in SAP business and likely to miss its FY14E guidance of 14-16%
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
Apr-15

Acquires Bharat Forge's 50% stake in Impact Automotive JV for | 10.8 crores. The JV was formed to manufacture hybrid solutions for automotives
Reports 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%

Reports strong Q2FY16 earnings as revenues grow 5.3% QoQ while EBITDA margins improved 441 bps to 14%.
Oct-15
Source: Company, ICICIdirect.com Research

Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10

Shareholding Pattern

Name
Nuvo ChrysCapital Advisors Pvt. Ltd.
Proficient Finstock, L.L.P.
Ruane, Cunniff & Goldfarb, Inc.
Fidelity Management & Research Company
KPIT Systems Employees Welfare Trust
CX Advisors LLP
Grandeur Peak Global Advisors, LLC
Patil (Kishore P)
DSP BlackRock Investment Managers Pvt. Ltd.
Norges Bank Investment Management (NBIM)

Latest Filing Date % O/S Position (m) Change (m)

30-Jun-15 13.80
27.3
0.0
5-Aug-15 12.27
24.2
1.1
30-Jun-15 8.28
16.4
6.3
30-Jun-15 4.56
9.0
-0.6
30-Jun-15 4.38
8.7
0.1
30-Jun-15 2.57
5.1
0.0
30-Apr-15 2.00
4.0
-0.2
5-Aug-15 1.94
3.8
-1.1
30-Jun-15 1.87
3.7
-1.5
30-Jun-15 1.83
3.6
-0.6

(in %)
Promoter
FII
DII
Others

Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

22.22 21.78 21.67 21.68 22.31
45.81 33.61 31.17 29.16 30.10
8.02
8.93 11.18
7.73
5.64
23.95 35.68 35.98 41.43 41.95

Source: Reuters, ICICIdirect.com Research

Recent Activity
Buys
Investor name
Ruane, Cunniff & Goldfarb, Inc.
Capital Research Global Investors
Proficient Finstock, L.L.P.
Kulkarni (Anil Gajanan)
The Vanguard Group, Inc.
Source: Reuters ICICIdirect com Research

ICICI Securities Ltd | Retail Equity Research

Value
9.19m
3.89m
1.74m
0.82m
0.49m

Shares
6.28m
2.66m
1.13m
0.32m
0.30m

Sells
Investor name
CX Securities, Ltd.
Reliance Capital Asset Management Ltd.
Morgan Stanley Investment Management Inc. (US)
DSP BlackRock Investment Managers Pvt. Ltd.
Patil (Kishore P)

Value
-17.71m
-3.77m
-2.46m
-2.20m
-1.73m

Shares
-5.29m
-2.57m
-1.59m
-1.50m
-1.12m

Page 7

Financial summary
Profit and loss statement

| Crore

Cash flow statement

| Crore

FY14

FY15E

FY16E

FY17E

2,694

2,990

3,262

3,588

20.3

11.0

9.1

10.0

1,818.0

2,147.3

2,299.1

2,544.8

452.8

515.5

570.8

613.6

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

343.0

248.5

338.0

378.0

Inc / (Dec) in sec.loan Funds

105

Growth (%)

19.9

(27.6)

36.0

11.8

Dividend & Divendend tax

(20)

(24)

(22)

(27)

Tax

94.1

11.5

87.9

98.0

Interest Paid on Loans

(18)

(29)

(22)

(18)

249.0

237.0

250.0

280.0

CF from Financial Activities

79

(47)

(94)

(95)

Net change in cash

(9)

229

67

117

Total Revenues
Growth (%)
COGS
SG&A expenses
EBITDA

PBT before Exceptional Items

PAT before Exceptional Items

Exeptional items
PAT before MI
Minority Int & Pft. from associates

249.0
-

237.0

250.0

280.0

Profit before Tax

Depreciation
(inc)/dec in Current Assets
(inc)/dec in current Liabilities

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

FY14

FY15E

FY16E

FY17E

39

39

39

39

FY15E

FY16E

FY17E

343

248

338

378

54

85

70

79

(160)

(125)

(102)

(116)

32

83

(20)

64

CF from operations

103

226

208

257

Other Investments

(116)

150

38

45

(68)

(100)

(85)

(90)

CF from investing Activities

(191)

50

(47)

(45)

Inc / (Dec) in Equity Capital

(50)

(50)

(Purchase)/Sale of Fixed Assets

Other adjustments
Closing cash

FY14

191

420

487

604

FY14

FY15E

FY16E

FY17E

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Balance sheet
Equity

| Crore

Key ratios
Per share data (|)

Reserves & Surplus

1,237

1,358

1,586

1,839

EPS

13.0

11.9

12.5

14.0

Networth

1,275

1,397

1,624

1,878

BV

66.3

70.0

81.2

93.9

Minority Interest

DPS

1.1

1.1

1.0

1.2

Other liabilities

23

42

46

50

Cash Per Share

9.9

21.0

24.3

30.2

Loans

439

445

395

345

3,013

3,280

3,689

4,151

15.7

10.9

12.0

12.0

Gross Block

530

630

715

805

PAT Margin

9.2

7.9

7.7

7.8

Acc.dep

317

402

472

551

Debtor days

91

86

83

86

Net Block

214

229

244

255

Creditor days

14

16

14

15

Source of funds

CWIP

Operating Ratios (%)

EBITDA Margin

Investments (long term)

12

12

12

12

RoE

19.5

17.0

15.4

14.9

Investments (short term)

174

59

59

59

RoCE

20.8

14.7

17.4

17.4

Goodwill

599

508

508

508

RoIC

55.6

35.3

41.1

41.1

23

23

23

Debtors

674

702

746

847

10.6

11.5

11.0

9.8

Cash & Cash equivalents

Inventories

Return Ratios (%)

Valuation Ratios (x)

P/E

191

420

487

604

EV / EBITDA

6.6

8.3

6.6

5.6

Loans and advances

74

90

98

108

Market Cap / Sales

1.0

0.9

0.8

0.8

Other current assets

73

81

88

97

Price to Book Value

2.1

2.0

1.7

1.5

Trade payables

102

127

123

152

Solvency Ratios

Current liabilities

226

254

228

251

Debt / Equity

0.3

0.3

0.2

0.2

58

69

75

83

Debt / EBITDA

1.0

1.4

1.0

0.8

3,013

3,280

3,689

4,151

Current Ratio

2.1

2.0

2.2

2.2

Provisions
Application of funds

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 8

ICICIdirect.com coverage universe (IT)

CMP
M Cap
EPS (|)
(|)
TP(|) Rating
(| Cr) FY15 FY16E FY17E
Sector / Company
550 500 Hold
6,181 31.4 34.0 40.0
Cyient (INFENT)
1,870 1,500
Sell
5,700 74.3 99.0 110.0
Eclerx (ECLSER)
32
45
Buy
2,168
3.3
4.2
5.1
Firstsource (FIRSOU)
859 1,050
Buy 120,838 51.4 55.0 64.0
HCL Tech* (HCLTEC)
1,147 1,300
Buy 263,505 53.9 57.0 65.0
Infosys (INFTEC)
136 135 Hold
2,681 11.9 12.5 14.0
KPIT Tech (KPISYS)
1,529 1,450
Buy 12,818 63.9 73.0 93.0
Mindtree (MINCON)
573 525 Hold
3,502 31.8 42.0 47.5
NIIT Technologies (NIITEC)
674 715 Hold
5,392 36.3 45.0 51.0
Persistent (PSYS)
2,537 2,800
Buy 499,957 110.8 119.0 130.0
TCS (TCS)
537 600
Buy 51,721 26.7 29.0 36.0
Tech Mahindra (TECMAH)
569 680
Buy 140,577 35.1 37.0 40.5
Wipro (WIPRO)
* June year end, Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

P/E (x)
FY15 FY16E FY17E
17.5 16.2 13.7
25.2 18.9 17.0
9.7
7.8
6.4
16.7 15.6 13.4
21.3 20.1 17.6
11.5 10.9
9.7
23.9 20.9 16.4
18.0 13.7 12.1
18.5 15.0 13.2
22.9 21.3 19.5
20.1 18.5 14.9
16.2 15.4 14.1

EV/EBITDA (x)
FY15 FY16E FY17E
13.5 11.0
8.6
15.1 11.7
9.9
7.3
5.8
4.4
12.5 11.0
9.0
14.9 13.4 11.4
8.3
6.6
5.6
13.8 11.5
9.1
8.2
5.9
4.9
11.7
8.9
7.3
17.2 15.2 13.4
11.8 11.6
9.3
11.6 10.4
9.1

RoCE (%)
FY15 FY16E FY17E
22.2 21.9 22.4
40.4 45.8 43.5
9.5 11.6 14.1
35.2 31.7 30.5
31.4 29.7 30.1
14.7 17.4 17.4
33.7 32.2 33.7
23.4 29.8 31.9
27.5 28.7 27.4
81.8 77.3 74.6
26.9 24.9 26.5
23.0 22.6 22.4

RoE (%)
FY15 FY16E FY17E
19.2 18.1 18.6
32.1 35.5 33.2
11.2 12.2 12.9
29.3 25.7 24.7
22.5 21.3 21.7
17.0 15.4 14.9
26.6 25.3 26.4
14.3 16.6 16.6
20.7 21.2 20.2
42.8 36.1 31.9
21.5 19.4 20.4
21.2 19.7 19.1

Page 9

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

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research

Page 10

ANALYST CERTIFICATION
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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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Page 11