n a press release issued by KPIT, Management has lowered Q4FY15 revenue guidance. The guidance adjustment has been attributed to cross currency headwind during the quarter. We expect 1‐3% downward revision in earnings due to the same. We retain our “BUY” rating.
Lowered FY15 guidance: KPIT reduced its Q4FY15 guidance due to cross currency headwind. According to the management, Q4FY15 is likely to flattish quarter‐on‐quarter. Revenue guidance for FY15 is likely to be met in constant currency. Moreover, there will be marginal growth in PAT for FY15.
Tweaking our model for the commentary: We tweak our expectation for FY15‐ 17 for weaker growth in Q4FY15. Our revenue and earnings forecast has been cut by 1‐3%. However, consensus’ expectation is likely to be unfazed by earnings downgrade commentary as expectations for FY16‐17 were for weaker recovery. We expect limited downward revision by Consensus. (Exhibit: 1)
Near term headwind ‐ In‐line with our expectation: As highlighted in our note ( “Structural recovery on track, near term softness likely”, March 3rd, 2015), we expected low single digit quarter‐on‐quarter revenue growth for KPIT in H1FY15. The problem with top clients and project delay in SAP got further compounded by cross‐currency headwind. We see this near term challenges to weigh down on stock price.
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