Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Creating Wealth through Alpha and Compounding

Yellowstone Equity

Providing unbiased and independent research on Indian equities to global institutions and individual investors


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Regulatory Disclosure: 
Note that Ankit Agrawal (Proprietor of Yellowstone Equity) is a SEBI registered Research Analyst (Registration No.: INH000007216). Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

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Compliance/Grievance Officer:
Name: Ankit Agrawal
Email: services@yellowstoneequity.com
Mobile: +91-7575817289
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Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/kpit-technologies-ltd" target="_blank" data-smartkarma-citation="entities:35189:1" rel="noopener">KPIT Technologies (KPITTECH IN)</a> ["KPIT Tech"; "KPIT"] reported a robust Q1FY23 earnings with CC revenue growth of 6% QoQ (26% annualized), well above the 18-21% guided for FY23.</li>
<li>The biggest positive surprise was on the margins front with EBITDA margins coming in at 19.4%, exceeding the 18-19% band guided for FY23, despite the supply-side headwinds.</li>
<li>More importantly, the demand outlook continues to be promising despite macro-economic concerns around US and Europe.</li>
</ul>



KPIT Technologies (KPITTECH IN) ["KPIT Tech"; "KPIT"] reported a robust Q1FY23 earnings with CC revenue growth of 6% QoQ (26% annualized), well above the 18-21% guided for FY23.
The biggest positive surprise was on the margins front with EBITDA margins coming in at 19.4%, exceeding the 18-19% band guided for FY23, despite the supply-side headwinds.
More importantly, the demand outlook continues to be promising despite macro-economic concerns around US and Europe.


KPIT Tech: Strong Execution; Margins Exceed Expectation

<ul>
<li>KPIT Tech reported strong Q4FY22 revenue growth (5%+ QoQ in constant currency [CC] terms). It also reported margin improvement, despite supply-side headwinds; with EBITDA margin at 18.6% vs 18.5% QoQ.</li>
<li>FY23 guidance came in optimistic with revenue growth expected to be in 18-21% range in CC terms and EBITDA margin projected to remain stable in the 18-19% range.</li>
<li>Demand environment continues to be robust with high visibility for growth. Q4FY22 total deal win was healthy at USD 200mm; including a large deal of Euro 70mm value.</li>
</ul>


KPIT Tech reported strong Q4FY22 revenue growth (5%+ QoQ in constant currency [CC] terms). It also reported margin improvement, despite supply-side headwinds; with EBITDA margin at 18.6% vs 18.5% QoQ.
FY23 guidance came in optimistic with revenue growth expected to be in 18-21% range in CC terms and EBITDA margin projected to remain stable in the 18-19% range.
Demand environment continues to be robust with high visibility for growth. Q4FY22 total deal win was healthy at USD 200mm; including a large deal of Euro 70mm value.


KPIT Tech: Robust Earnings and Strong Guidance

<ul>
<li>Despite the elevated valuation, KPIT remains a high conviction idea for us as we see potential for 21%+ earnings CAGR over the next decade. </li>
<li>Given the strong growth visibility, KPIT can sustain its current elevated valuation of 12x P/B and thus an investment in it can offer 21%+ CAGR over the next decade.</li>
<li>Even if its exit valuations were to decline by 1/3rd at the end of the decade, it can still offer 16%+ CAGR.</li>
</ul>


Despite the elevated valuation, KPIT remains a high conviction idea for us as we see potential for 21%+ earnings CAGR over the next decade. 
Given the strong growth visibility, KPIT can sustain its current elevated valuation of 12x P/B and thus an investment in it can offer 21%+ CAGR over the next decade.
Even if its exit valuations were to decline by 1/3rd at the end of the decade, it can still offer 16%+ CAGR.


KPIT Tech: Earnings and Growth Visibility Remain Strong

<ul>
<li>Since our initiation note on Jun 3, 2020, KPIT Tech's (KPIT) stock has rose &gt;8x. And we are still counting, as we see IRR potential of 20%+ over next 3Y. </li>
<li>KPIT reported outstanding Q2FY22 earnings. Despite guiding for margin contraction last quarter, KPIT surprised with margin expansion. It also reported strong growth in revenues and a robust deal flow.</li>
<li>Backed by a healthy order book, KPIT raised FY22 growth guidance to 18-20% from mid-teens earlier. It also guided to maintain FY22 EBITDA margins at 17.5%+ vs 16.5-17% guided earlier.</li>
</ul>


Since our initiation note on Jun 3, 2020, KPIT Tech's (KPIT) stock has rose &gt;8x. And we are still counting, as we see IRR potential of 20%+ over next 3Y. 
KPIT reported outstanding Q2FY22 earnings. Despite guiding for margin contraction last quarter, KPIT surprised with margin expansion. It also reported strong growth in revenues and a robust deal flow.
Backed by a healthy order book, KPIT raised FY22 growth guidance to 18-20% from mid-teens earlier. It also guided to maintain FY22 EBITDA margins at 17.5%+ vs 16.5-17% guided earlier.


<p>KPIT reported strong Q1FY22 earnings. Overall, the earnings growth was led by margin expansion (EBITDA margin expanded to 17.3% vs 13.4% YoY) and high-teens QoQ revenue growth. The guidance also remains robust. While the stock has more than quadrupled since our initiation note <a href="https://www.smartkarma.com/insights/kpit-technologies-a-pure-play-on-automotive-technology" target="_blank" data-smartkarma-citation="insights:39900" rel="noopener">KPIT Technologies: A Pure Play on Automotive Technology</a> in Jun 2020, we believe the upside potential still remains significant.</p>

KPIT reported strong Q1FY22 earnings. Overall, the earnings growth was led by margin expansion (EBITDA margin expanded to 17.3% vs 13.4% YoY) and high-teens QoQ revenue growth. The guidance also remains robust. While the stock has more than quadrupled since our initiation note KPIT Technologies: A Pure Play on Automotive Technology in Jun 2020, we believe the upside potential still remains significant.

India

KPIT Technologies Limited operates as a technology company. The Company specializes in embedded software, artificial intelligence, and digital solutions. KPIT Technologies serves automobile industry worldwide.

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KPIT Technologies (KPITTECH IN)

KPIT Tech: Strong Execution; Margins Exceed Expectation

KPIT reported strong Q1FY23 earnings and is on track to deliver 30%+ earnings growth in FY23. As per our estimates, an investment in KPIT has...

Ankit Agrawal, CFA

KPIT Tech: Robust Earnings and Strong Guidance

KPIT reported strong Q4FY22 earnings in line with expectation. It also guided for a robust FY23 led by the strong demand environment and excellent...

Ankit Agrawal, CFA

KPIT Tech: Earnings and Growth Visibility Remain Strong

KPIT has potential to generate 21%+ earnings CAGR over the next decade led by strong industry tailwinds in the automotive technology sector and...

Ankit Agrawal, CFA

KPIT Tech: 8-Bagger And Counting!

KPIT is up >8x since our initiation 1.5Y ago. In Q2FY22 update, KPIT raised FY22 revenue growth guidance to 18-20% from mid-teens earlier and...

Ankit Agrawal, CFA

KPIT Tech: Hitting All the Right Notes

KPIT has quadrupled since our initiation note in Jun 2020. It remains one of our best picks to play the new-age automotive technology theme. With a...

Ankit Agrawal, CFA

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