KPIT Tech Q1FY22 Conference Call Highlights

• Profit has increased while EBITDA is constant because the depreciation has decreased while forex gains have increased.

• DSO is probably the best in the industry at 50 days

• Cash generation is healthy

Employee

• Attrition rate of the Kpit tech market cap is high in H1 nearly 20% while in H2 it will get normalized. Company  is planning to hire a net 1000+ in FY22.

• Salary hikes will occur in Q2 FY22 due to which EBITDA will be impacted on gross basis by nearly 3% but on a net basis of Kpit tech share price, the impact will be only 1% because of good growth momentum, strong order book.

Client Highlights

• According to Kpit Technologies' annual report, the company has maintained its philosophy of engaging with Top 25 clients which contributes nearly 85% of its revenues. The relationship with these clients is on a long-term basis (5+ years).

• Large deals of Kpit technologies stock analysis take time and expertise to fructify. Hence, the company takes expertise both from inside and outside the company for the Kpit technologies analyst report.

• This year the growth in the Asia segment was higher because of the lower base of the Kpit tech dividend. The company maintains growth will be broad-based across Kpit tech share geographies in FY22 according to Kpit technologies share analysis.

• Company has clients from Japan and China plus one client from South east Asia according to the Kpit tech annual report  . Interest in the Chinese clients is from the perspective of disruptive technology of the Kpit tech share price history.

Segment-wise Analysis:

• Software Architecture takes around 4+ years to develop while other emerging areas like autonomous cars, electrification, vehicle engineering takes around 2- 4 years.

• Company is now solely focused on the software part of the vehicle business. They have divested completely from the hardware part of the business.

• Other segments in the revenue mix consist of vehicle engineering and design aspects.

• Power train segment has a large growth potential. They are planning to spend the largest in R and D this year in the coming 2 to 3 years.

• Their client conversion rate is about 50%

• Acquisition: In the last quarter they have acquired Pathpartner which is into operating system software plus the company can leverage their existing partnership with semiconductor companies.

• Company is comfortable in Fixed price revenue basis as compared to time and material basis as it is more flexible and margin accretive. 

Future Trends:

• Long term growth in the software market is 10%+, New architecture for vehicles, new design, connected vehicles and autonomous vehicles.

• Guidance: Profitability margins (16.5 – 17%)

• Company will be 3x even if they continue to do what they are doing currently, without adding other segments in the revenue mix.

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