Wednesday, 1 November 2017

In Search of the Miraculous: Capability---KPIT Technologies.

This is in continuation of our earlier post on picking companies with great capabilities.

I just love this company and it was advised earlier also in this blog (Click here). Off late bought a good quantity of this one around 110-120 and it has been advised regularly to email group. Amid all the "Hulla gulla" about the high growth of electric vehicles in the "FUTURE"....this company is actually doing electric vehicle business at PRESENT. Its EV Buses are running at parliament, MOU for 100 buses for PUNE smart city, Ludhiana is also under way.

It has secured more than 20 patents for EV Bus...developed Lithium battery in house in India…these buses are equipped with KPIT's Integrated Intelligent Transportation System equipped with vehicle tracking systems, wi-fi, CCTV, vehicle health monitoring, fare collection etc. Already some 1000 buses are running in Pune with its GPS system installed in them. KPIT has great capabilities in IOT and this Intelligent Transportation System (ITS) for buses is an example of IOT. These will transform the public transportation system in India from dirt filled buses to AC high tech buses available on our cell just like OLA/UBER. 

Indian Govt has serious plan to convert low grade public transport system of India as we don’t have other choice either just like China which has around 97% share in EV Bus industry. This success has its link with China's desperate need to deal with its pollution. Their schools, factories were at the edge of closure due to pollution.  The same thing is going to happen in India as well as at entire globe.

An imported electric bus costs about Rs. 1.75 crore whereas the one converted indigenously by KPIT will cost about Rs. 60 lakh, the price of which is likely to be reduced further on technology advancement

At present not much is being talked about KPIT but it has real capacities that too working at present. KPIT is working with CIRT and other concerned authorities to further refine this technology as well as the necessary certifications. KPIT will have 2 working models, working with OEMs and Retro-fitting existing vehicles.  They are already in talk with OEMs regarding ’embedding’ their technology.

Public transport consumes high volume of fuel and the same is rising due to high traffic which reduces the mileage further resulting in the increase of fuel costs like Mumbai spends around 18% of their operational costs on fuel while in Bengaluru it comes to 38.6 per cent. Since power supply is cheaper than fuel, the savings on fuel and the investment on the electric vehicle will balance each other out in the long run. So I think we’ll see some concrete steps by Govt on public transport. 

The issue with EV is only the high cost of batteries although the same is falling fast and may soon be costing way lower just like the prices of solar cell has fallen in last 5-6 years. Still different models can be used to lower the cost of batteries like a bus will need a big battery costing big amount but after the life of battery for Bus is over we can use the same for E-rickshaws or for small capacity solar power system. Also, cost is higher for higher capacity but where there are cases where buses are doing short runs like 100 KM a day then there is no need for big costly batteries. Most of the city buses may fall into this category, a company bus for employees will also fall into this.

 KPIT has already developed great capabilities in making connected factories where everything from raw material, inventory, processing, plant/machinery repair etc. is connected with IOT system. Manufacturers are getting the importance of IOT revolution in making their factories Smart. They are deploying advanced technologies such as sensors or connectivity devices, software applications, big data, analytics, cloud, 3D printing to build ‘smart factories’ that drive process improvements in areas such as supply chain, transportation, communication, housing, energy, and production. KPIT, for example, has designed KwikPick, an augmented-reality, hands-free warehouse picking solution with a wearable glass that guides picker in real time about the location of the item on a shelf, automatically scans bar codes, etc.
KPIT has created a number of products and solutions for smart factories which are easy to use in noisy, busy and always-on environments. Based on industrial IoT, they provide visibility on the reliability of assets, optimise supply chain, and enhance customer and employee experience. Some of the supply chain optimisation solutions include a supplier portal, KPIT warehouse management system, KWM, AR-based warehouse picking solution, KwikPick, intelligence mining tool, Akoya, mobile field service solution, K-Fieldserve, mobile proof of delivery service, ePoD and intelligent transport system, ITS and many more .

KPIT has turnover of 3500 cr with NP of around 250 cr…so it is not a small duck. Its very strong engineering vertical has TO of 1300-1400 cr and KPIT is a global partner for vehicle giants. EV vehicles will have much larger and complex electrical systems which will surely benefit KPIT. Its product and platform business vertical which also includes EV is relatively small with some 150 cr turnover but KPIT has made big investments in the past for this and is now primed to extract the most out of it. 

KPIT is not and should not be treated as a traditional IT company because of its business being related to product development and engineering design…another proof is that KPIT doesn’t hire people trained in IT language like Java/VB but engineers with Btech/Mtech having IT exposure. And I am sure one day market will realize its strength. KPIT is trading at a PE of just 10, Dividend yield 2%, cash in the books 530 cr, market cap is around 2300 cr with revenues of 3500 cr, has around 60 patents, all these indicate it is a big re-rating candidate.

Last day its results came out and it has beaten the market expectations big time. Market was expecting a flat turnover of 877 cr but it has given 916 cr, market was expecting EBITDA of 74 cr but it has crossed 100 cr, market was expecting NP of 45 cr but it has earned 60 cr. I think market was expecting lower due to expected hike in employee costs but the company managed to cover the same by increasing their top line.
Institutional investors are buying this one off late and I think after last day’s results we may not be able to see it at 150.

(Views are personal and should not be taken as a recommendation for buying or selling a stock. Stock markets are inherently risky so kindly do your Due Diligence before investing. I am not a certified Sebi Analyst and holding the shares discussed in this Post)

1 comment:

  1. ---------- Forwarded message ----------
    From: Gurpreet Singh
    Date: 1 November 2017 at 12:24
    Subject: Fwd: Zee Learn

    Hi pankaj, Actually this pledging of the shares by ZEE promoters is the thing which will always keep you on the edge. They are pledging and releasing the shares all the time whether it is Zee Entertainment the giant, Dish Tv or Zee learn. I think somewhere in the june-17 pledge in ZEE learn was reduced to Nil. Also, Pledging doesn't mean that debt is raised by Zee learn...promoters also pledge shares when they need money for their private ventures....but this is entirely their doesn't have any relation with the underlying listed company like zee learn in this case. Risk of panic sale by lenders and then acquisition is always there but it is only for week and shabby companies.

    I don't think the same risk is here with the strong cash generating Zee group. There are several group holding companies belongings to Subhash chandra who take debt at the pledge of group stocks like Sprit Textiles Private Limited which also appears in the promoter list of Zee learn and other companies.

    So i think we can ignore these pledges...although i can't say that Subhash chandra is man of highest integrity but still i think we can manage his stocks in our portfolio ;) :)

    Few days back added more at 45.


    Gurpreet Singh.

    ---------- Forwarded message ----------
    From: pankaj pant
    Date: 30 October 2017 at 17:15
    Subject: Re: Zee Learn
    To: Gurpreet Singh

    hi GS
    this month Zee Learn has again pledged their holding .whats your take on this