The Hindu Business Line : KPIT Cummins scrip draws bourses interest

Brokers said that the counter has been infused with an optimistic undertone ever since Cummins had taken a stake in the company. "A sound business model and with valuations touted as one of the lowest in the industry, is likely to sustain interest at this counter," a broker added.

While the stock ended weak at the end of trade on Thursday in line with the bearish market trend, analysts are of the view that it offers fastest earnings growth in the IT sector with high visibility. "Its valuations look compelling at this juncture. All the revenue growth triggers are in place. We expect that the growth in profits will exceed growth in topline for the next couple of years. We are looking at an EPS of Rs 35 next year," an analyst tracking the company said.

Ninety-three per cent of the company's revenues are contributed by top 10 of its clients, of which Cummins heads the list. "Apart from the fact that its client list includes Fortune 500 companies (Deutsche Bank, UniLever etc.), a recent addition of BNP Paribas in the BFSI segment and two high potential customers in the embedded segment, has added further weight to its portfolio," sources said.

Yet there is a perception that the company's focus or the fact that it is looking at strategic clients within two verticals could be risky in the long-term. "The company has the potential for good growth and could prove to be an outperformer, but they have not been able to leverage on their restructuring as they should have. While there is no denying that topline ramp up has taken place, the bottomline could do better," an analyst with a domestic brokerage said.

Analysts opine that the reliance on Cummins could prove to be risky in the long-term. "They need to make offshore transition in their work and ramp up strategic clients," sources said. The stock ended the day at Rs 204.90 on the NSE with around 62,071 shares traded. On the BSE, the stock ended at Rs 203.70 with around 21,612 shares traded.

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