KPIT Share Price Falls Nearly 4%: Hear What The Management Has To Say

Summary

In this interview, Mr. Kishore Pel, CEO and MD of KPI Technologies, discusses the company's impressive growth despite a challenging environment. With a 24.8% increase in revenue and 52.4% rise in profit, KPI Technologies has maintained a strong financial performance, expanding margins and positioning itself for continued growth. Mr. Pel emphasizes the company’s focus on the automotive and mobility sectors, highlighting future growth opportunities in Asia and Europe, while addressing competition from major IT firms. He remains confident in the company's ability to capture a larger share of the global market, particularly in the high-margin segments.

Takeaways

• 😀 KPI Technologies achieved a 24.8% increase in revenue and a 52.4% rise in profit year-on-year for Q1, showcasing significant growth.
• 😀 The company has now completed 16 consecutive quarters of growth, with revenue increasing 2.5 times and profit growing 4 times during this period.
• 😀 Despite additional costs like ESOPs and promotional expenditure, KPI Technologies maintained its margin guidance above 20%.
• 😀 The company is projecting organic revenue growth of 18-22% for the upcoming quarters, with a focus on maintaining operational efficiency.
• 😀 High-margin deals and increased operational efficiency are key levers for maintaining profitability amidst increased expenses.
• 😀 The geographic revenue mix for KPI Technologies is currently 28% from the US, but growth in Asia, particularly China and India, is expected to drive future expansion.
• 😀 KPI Technologies believes Asia will be a high-growth market for the future, driven by large automotive markets like China and India.
• 😀 Europe is expected to continue its growth, despite economic challenges, and KPI Technologies has firmly established itself in this region.
• 😀 The US segment showed some softness this quarter, but KPI Technologies is confident in a recovery due to a diversified client base and strong market opportunities.
• 😀 Increasing competition from major IT services companies entering the ER&D space, like Cognizant and Infosys, is noted, but KPI Technologies remains confident in its global leadership in automotive mobility.
• 😀 Competition from Chinese companies is intensifying, but KPI Technologies believes its singular focus on automotive mobility gives it a competitive edge.

Q & A

Can you provide an overview of KPI Technologies' performance in the first quarter of this fiscal year?

In the first quarter, KPI Technologies reported a 24.8% year-on-year revenue growth in constant currency, with profit after tax (PAT) increasing by 52.4%. This marks the 16th consecutive quarter of growth, and revenue has increased by 2.5 times, while profit has grown four times over this period.

What factors contributed to the company's margin expansion despite the increase in expenses?

The margin expansion was achieved through operational efficiency and high-margin deals, even though expenses increased due to stock option grants (ESOP) and promotional costs. Despite these additional expenses, KPI Technologies managed to maintain its guidance for revenue and profitability.

What are the company's expectations for revenue growth and margins for the remainder of the year?

The company has maintained its revenue growth guidance of 18-22% and its margin guidance of over 20.5%. These targets will be supported by continued operational efficiency and high-margin deals.

How is KPI Technologies performing in the US market, and what challenges are they facing?

The US market showed some softness in the recent quarter, primarily due to challenges related to OEM trucks. Despite this, KPI Technologies is optimistic about future growth in the US, citing a strong pipeline and good discussions with clients.

Do you foresee a shift in the revenue mix, especially with regard to the US and Asia?

Yes, KPI Technologies expects the revenue mix to shift in the long term, with Asia becoming a larger contributor to the overall revenue. However, the US market is still important, and while Asia is the strongest growth market, the company’s outlook for the US remains positive.

What are the key markets driving growth for KPI Technologies?

Asia is expected to be the main driver of high growth, particularly in markets like China and India, in addition to traditional markets such as Japan and Korea. Europe will also continue to experience growth, despite some economic challenges.

How is KPI Technologies positioned relative to the increasing competition from large IT services firms?

KPI Technologies differentiates itself by being a focused player exclusively in the automotive and mobility sectors. The company believes it is the largest global player in this niche, with growth rates higher than competitors. The company's proactive investments are ahead of the curve, positioning it well to capture a larger share of the market.

What impact do acquisitions by large IT companies, like Infosys and Cognizant, have on KPI Technologies?

While the acquisition of ER&D companies by large IT firms like Infosys and Cognizant increases competition, KPI Technologies remains confident in its unique position. The company focuses solely on the automotive and mobility sectors, where it holds a leadership position and expects to capture a larger share of the growing global market.

How does KPI Technologies view the competitive pressure from Chinese companies?

KPI Technologies acknowledges rising competition from Chinese companies, particularly in the sourcing of technologies. However, the company believes its strong presence in Europe and proactive investments will help it remain competitive on a global scale.

What are KPI Technologies' long-term expectations for the global automotive technology market?

KPI Technologies expects the automotive technology market to continue expanding globally, with **Asia** leading growth, followed by **Europe** and the **US**. The company is confident that its focused approach and market leadership will allow it to capitalize on the growing demand in the automotive and mobility sectors.