As long as kishor Patil is in the company I have no fears. I’ve watched every interview he has ever done and every time I hear him speak my conviction increases. He has huge aims for the company and so far everything he has said has come true. I don’t know much about the rest but I’d bank on him to steer the company through the next few years. If he does leave then il be a bit wary. Recently the CFO vinit teredesai left and joined mindtree so I’m hoping that’s not going to be a trend.
why do you say this? can you share any red flags you may have observed?
@rajdori… read through the thread above beginning to end for the promoter history issues. The main issue for me wasn’t the promoters but them trying to drag the IT business along. The amount of debt /pledged shares involved trying to make that profitable was crazy. I always liked the auto side of kpit since individually the auto side of the company always did well. The demerged solved all problems for me. They seem like a brand new company since then. It’s just been 2 years but look at the difference in revenues between 2019 and 2020. This share is screaming for a re rating. And imo it’s promoter, debt and profitability issues are in the past now. It’s current mcap is 1700 and its revenue is 2100. Imagine paying under 1x multiple for a tech company building a moat wrt preparing the auto industry for the future. And after watching tons of Kishor Patil interviews and going through all the concalls since the split I have to say I’m convinced. Recently watched an interview with Patil recently answered a question regards how they get clients and he spoke about how “A huge client from the auto industry came in for a meeting one day for a huge project. Patil asked him how they heard about KPIT. Apparently the client had asked tcs(if I’m not mistaken) who was their most feared client. And tcs replied KPIT. So the client came to KPIT.” And the interviewer fact checked and it was true. lol.
Disc: I’ve bought a 1000 shares already and will be adding 1000 every year for the next few years based on results as long as the long term story is intact. Revenues grew by above 300 percent in one year of proper functioning since the demerged and profit grew by just under 300 percent. They’ve now for almost no debt and free cash flows.
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Not expecting the revenue and profits to increase by 300 percent every year obviously. However, this shows the efficiency they are running at now. I believe this will be their new base of revenue which definitely deserves a higher valuation. Commentary said that H1 will be a bit difficult but they have a huge amount of orders for H2 so this year should be fine and there’s no risk as such at this price point
@Malkd
Hello Malkd is it possible to share the details of interview where Patil says reference about TCS.
Are you sure it was TCS ? As tata Elixi is also in the same field will they refer KPIT ?.
Did I interpret your message wrongly ?
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Not sure if this thread is about new KPIT or the demerged entity which got merged with Birlasoft. So, posting this information.
Mr. Anjan Lahiri – Managing Director & Chief Executive Officer resigned due to personal reasons, with effect from June 1, 2019
Source: Birlasoft Annual Report 2019-20.
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KPITs results were out a few days ago. https://www.kpit.com/investors/
As expected and guided openly by management the quarter was hit. However it wasn’t hit as hard as first imagined and they still have lots of cash in the kitty and no long term borrowings and easily manageable short term borrowings. Revenues down by 10 percent but PAT down by 21 percent YOY. Whole H1 was expected to be a washout though so it’s all in line. The good news is they have listed loads of new projects including a 60 million dollar one in Germany. What’s interesting about KPIT (not birlasoft) is it’s revenues per quarter are above Tata elxsi’s revenues and Tata elxsi is valued at 3x more market cap and is in the same exact business. As far as name is concerned it is pretty big in the industry too ( @Nigil I meant Tata elxsi in my post above . My mistake) The difference in valuation is due to elxsis higher margins. Since demerging management has been trying to improve their margins and looking at projects in the pipeline sales continue to look good. So as investors we just need to track margins… that’s it… making it a super easy company to hold and follow. As long as it increases qoq this is going to be re rated. My only issue with kpit is that there seem to be too few of us who hold it. So discussing it becomes very difficult. Btw MFs increased holdings from 5 percent to 10 percent YOY. So they are bullish. But herein lies the problem. I am too bullish on this too and I need someone who can show me negatives but this forum is barely active. I swear that’s one of the main reasons I haven’t gone all in on it yet.
Disc: Partly invested… adding based on improvement in margins every quarter.
Note: it’s current revenue is more than its market cap. It is screaming value buy imo
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Thanks for writing about the last quarter results! I have been a silent reader of VP, and feel intimidated by the vast knowledge fellow VP members present. Please excuse me for my naive questions, if any.
- KPIT last quarter result shared on their site, mentions net cash to be 3939 million INR, which would be 393 cr, while the market cap of the Co is 2000 cr. Am I missing something?
- I compared debter days of KPIT and Tata Elxi, and the high debter days of KPIT bothers me.
- I also observed variation of OPM in early years in KPIT. It has been consistent in last three years. Is it sustainable?
Disc: No holding so far. Trying to understand by going through Screener and AR (yet to complete)
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@greengoblin My mistake! I added an extra zero when checking and din’t even realise. This is exactly why I needed this forum. OPM has never been an issue and never stood out. So I’ve ignored it. One more thing to add to the list of what to watch out for. Ebitda margins is what management usually guides for and that’s what I check and its been in line since Q3 last year. Regards debtor days… KPIT had a concentration of 25 main clients they’ve been working with for years(they’ve added more since the demerger) and their relationships are strong with these clients and they’ve never had payment issues. It’s a very competitive field and I remember an interview a while back was this was adressed. The gist was… it’s a competitive field and for them to get big clients they had to make compromises… one of which was high debtor days. But the relationships have been strong and so far there have been no issues. Note that I have been tracking them only since the demerger so my knowledge before then is very limited. I am also not fully convinced yet so hence only partly invested.
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@Malkd - Just took small position today morning. It’s on circuit hence couldn’t add more. Studied their AR and other details, like you I also find it interesting. Actually am holding position on LTTS, despite not so good results stock shows good resilient, which drove me to other similar companies. I studied Sasken and KPIT. Both seems good.
Pros:
- What not to do (Will not sale hardware - focus)
- Industry - Good. Being into IT I can co-relate.
- Others: Reputed Auditor, stake by Ashish K, Growth in Europe, Management drawing less salary etc.
Cons:
Promoter holding is less, Need to limit acquisition adventures and pledged holding.
Agree with you that’s interesting franchises, however being small cap and newly listed - need to proceed slowly. I will go ahead as per execution of story and numbers.
Will add more probably later but with you in studying…
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Cheers. I’m not fully convinced yet so il be doing the same… ie adding every quarter as long as things look good. The problem with small cap IT is sometimes they tend to remain small just due to the nature of the field with the bigger companies taking bigger clients. Intently waiting for sonatas agm next week too. I love sonata but the sectors it operated in were worried. Narrowed it down to those two companies from tech(though both aren’t pure IT). Still studying both though. Will update here if I find anything more. Btw, kpits profit took a hit due to the lease it had to pay in Germany. Found that bit of info. From this quarter it will be operational and hence won’t be loss making.
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@Malkd Appreciate your thoughts.
I am still half way of reading AR, and making notes. I hope it is under forum good guidelines to share notes and observations in staggered manner.
I stumbled upon the company’s focus on KPIT being talent creator and their vision to make it a ‘Great Place to Grow’ for all employees." I quickly checked their reviews on Glassdoor and Indeed, two reliable places where I would check reviews before joining a company.
Ratings are 3.2 (Glassdoor) and 3.8 (Indeed) respectively. Further skimming through reviews point to non-cooperable work culture, messed work life balance, high management’s lack of vision on delivering quality and less pay.
Do you see it as a red flag on attracting talent, which can be a blocker in company’s growth? Quality employees is an important factor in Co’s growth.
Few weeks ago, I attended Harsh Mariwala’s (CEO of Marico) talk in Motilal Oswal conference. One of the key observation was his key focus on quality hiring. May be I am trying to compare apples vs oranges. I would like to know your thoughts.
Hey Greengoblin. I’d checked the same earlier. Noticed two things.
- Most of the unfavorable reviews were pre demerger. Back then there was a lot going haywire with the company. You’ll see this even if you go a bit further up this thread to the origin
- Many reviews look like people who are upset that the entire focus is on auto with almost nothing else for them to learn. I’d take that as a good thing
Some reviews regarding bias etc are worrying. Overall i wouldn’t say it’s a red flag but it could be something to look at more deeply
Btw it’s about on par with infy , tcs etc in indeed. It’s about 0.6 less on Glassdoor. Overall I dunno what to make of it.
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Notes from the annual report(can’t attach it since it’s 12 mb). I read the first 30 pages and skimmed through the rest
- Very confident sounding management . Looks like covid won’t have any effect on them from next quarter onward and will have minimal effect this quarter
- Operating margins are sustainable.
- Plenty of new projects all of which are listed even on their website. Looks like the increase in revenue since the split is now the new norm
- DSO has reduced by about 20 percent(no direct mention regards debtor days obviously but a reduction there would be a reduction percent here too I’d imagine)
- Very bullish about the growth of autonomous and power train
- Relationship with T25 clients is good
- They are trying their best to seperate Pre demerger kpit from post. They mention the changes quite often throughout
- Some good initiatives for employees and they’ve only cut variable pay. One of their priorities is now employee satisfaction and they keep mentioning pre demerger and post regards this too (@greengoblin … have a look if possible)
- Good amount of cash reserves compared to last year
Overall, I felt like I was reading an annual report made by a very huge auto tech company and my conviction has just grown a lot stronger. Il be going through it in more detail later.
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Kishore Patil, the key man on the road ahead.https://www-financialexpress-com.cdn.ampproject.org/c/s/www.financialexpress.com/auto/industry/a-modern-car-is-mostly-about-software-in-conversation-with-kishor-patil-co-founder-md-ceo-kpit-technologies-autonomous-driving-gadgets-details-bmw/2034665/lite/
Thanks @Malkd for summarizing the AR, and sharing the notes!
I just went through Q4 Fy20 ConCall. Couple of observations my amateur eyes could see. Please correct me, if you find there is something wrong.
- I sensed short term uncertainty (for at least two quarters). They are bullish on things getting back to normal post Covid
- They talked highly on passenger cars disruption. People are likely to buy personal vehicles due to hygiene. Given the dependence on cyclical auto sector, I feel it’s medium to long term play (3+ years).
- They were right about the revenue being down by 15% in Q1. However, PAT has reduced around 40% in FY21Q1. Did you get a chance to dig into it?
- Their focus on talent satisfaction. However, they have switched half yearly review to end of year. They have changed some variable pay as well, as you rightly mentioned.
- They have good cash reserve for rainy days. Capex plan is also deferred.
- One of the persons mentioned about decrease in debter days to some 60 days, while asking question.
Overall, I haven’t got good conviction yet, which I got much more in Laurus 
(see the bullish tone in ConCall)
I am yet waiting for Q1 ConCall to see how the story is playing out. On the lighter note, Ashish Kacholia has reduced stake from 1.65% to 1.08%
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Ya…found this in the annual report
conditions.
"As per our initial assessment there will be significant
impact in H1 of FY 2021 and we expect recovery to
commence from Q3 of FY 2021. KPIT has a strong
Balance Sheet with over INR 3.8 billion net cash balance
and negligible debt. Its collection cycle remains strong
with DSO @ 66 days and highest level of customer
engagement with its strategic customers. It has
also taken proactive steps in deferring its mediumterm capex plans and pulling out levers to manage
profitability. "
They say their Days sales outstanding used to be around 87 and is now 66. Screener says debtor days are 336. Doesn’t DSO mean debtor days(it’s literally interchangeable)? How did screener get 336 in the first place if they were at 87 and now 66?
Also PAT was down in FY21Q1 since they had to pay lease on their new German building and due to corona they did not actually get to start running it fully from what I recall reading.
Also, regards the auto cycle… a lot of kpits revenue looks immune to it. While a lot of it is geared towards current selling… companies look like they are signing long term contracts for future technologies and research. They act almost like the R&D dept of a few auto companies is what I’ve seen and they are getting auto out of their current rut and helping with tech and pollution control (electric) to do so
Also this came out yesterday:
While its just delhi it paves the way for kpit and sets them up really nicely considering they are fully specialising in auto vs its competitors. Could explain upper circuits
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Any information of new deals they won. I heard some news about there bid going on
For anyone still following kpit … today it hit its all time high fueled by the promoter anupama patil buying 14 lakh shares @100 on Friday (held just over 1 lakh+ shares previously). Looks like it has broken it’s 1.5 year resistance too. Looks an interesting technical and fundamental bet atm considering tailwinds and possible re rating of its sector. Been searching for new deal wins but haven’t found any. Will need to wait for the quarter results for further commentary
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The question is that who sold 14l shares?