Dear All,
Forwarding you the Event Update on KPIT Cummins Infosystems.
KPIT Cummins Infosystems (KPIT) has acquired 50% stake in Systime Global Solutions (Systime), the world’s largest JD Edwards (JDE) solution provider, for a consideration of `103cr (all cash deal). KPIT will acquire the remaining 50% of the equity and preference shares of Systime over a period of three years (zero debt company), at a price which will include a certain fixed and variable consideration. The total cost of the acquisition, estimated by the management, on the higher side is `250cr–300cr.
Systime, a wholly owned subsidiary of the CMS Group, is a global business solutions provider delivering services for the past 15 years. Oracle’s JDE Enterprise is an integrated suite of comprehensive enterprise resource planning software that enables rapid deployment and ease of administration with low total cost of ownership. The worldwide installed base of JDE is estimated to be around 5,000+ customers, many of which are Fortune 500 companies.
Systime derives 35% of its revenue from the manufacturing industry and 15% from energy and utilities. This association is aligned to KPIT’s strategy of serving customers in the manufacturing (~78% of KPIT’s revenue) and energy and utilities (~5% of KPIT’s revenue) industries, where JDE has been a leader. This acquisition brings in reputed logos such as BP, Castrol, HP, Exon Mobil, Reckitt Benckiser, OTIS and Honeywell. Apart from these, Systime also brings in logos for various verticals such as lifesciences, hi-tech and airlines.
Outlook and valuation: The company’s acquisition of 50% stake in Systime is expected to catapult revenue growth to a 29% CAGR from 23% CAGR (earlier) over FY2011–13E. Also apart from various levers available to improve margins in its organic business, the acquired company has adequate levers such as 1) rationalising SG&A (30% to sales) 2) facility consolidation and 3) headroom to pull up utilisations by 8–10 percentage points (pp) offshore and 3–4pp onsite and 4) effort shift towards offshore. Overall, this acquisition is expected to be EPS neutral in FY2012 and accretive FY2013 onwards. Thus, our EPS for FY2012 remains unchanged at `12.8 but for FY2013 we have revise it upwards to `17.4 from `16.7 earlier. Hence, we revise our target price to `209 from the earlier `200 and maintain a Buy view on KPIT.
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
No comments:
Post a Comment