Stock Idea: KPIT Infosystems Ltd.

Company overview—
KPIT Infosystems Ltd. was promoted by Kirtane & Pandit, an accountancy firm to add Information Technology to its suite of services. The group is one of the front-line Indian groups in the area of Information Technology, Business Consulting and Management. The company has its headquarters at Pune, and has two other India offices in Bangalore and Mumbai to house its various functions. The company was incorporated in 1989 and came out with its premium public offering (IPO) in February 1999 at Rs 90 per share, aggregating Rs 11.61 crore. KPIT has partnership agreement with CONSOR AG, a leading IT consulting and solution provider in Switzerland. CONSOR has been providing IT consulting services and solutions over the last 20 years. It provides technical consultation for project conception and design. The client list of CONSOR includes some of the biggest names in the Swiss market and will act as the front-end in the Swiss market. In May 2002, the IT subsidiary of engine major Cummins India-Cummins Infotech (CIL) has merged with KPIT Infosystems, for forming a mid-sized software developer, KPIT Cummins Infosystems.
Products & services—
KPIT Infosystems Limited provides software development, maintenance and implementation services for the banking & finance, consumer packaged goods, engineering, and telecommunications software sectors. Company’s strengths lie in Internet consulting and development, re-engineering & migration, software product development & management, business intelligence solutions, oracle applications, control automation and engineering solutions. Company has four core areas of its operations i.e. Advanced Technology solutions, Manufacturing Business IT, Diversified Financial services, BPO. Company is CMM Level 5, ISO 9001:2000 certified.
Advanced Technology solutions:
Company has expertise in product development and embedded systems at optimal costs and faster timeframe. Company offers turnkey technology solutions from pre-product design to its release and maintenance. These solutions encompass industries like Automotive Electronics, Industrial Automation, and Semiconductor Solutions. Company has presence in development of Supervisory Control and Data Acquisition systems, projects in automotive engine controls, development of high speed Video DAC for HDTV and video/graphics applications, I/O Cells Development, and open source (GNU) tool chain for a family of micro-controllers.
Manufacturing business IT:
Company has presence into development of our proprietary Business Intelligence tools, center of excellence of the Oracle Apps practice and the focused SAP practice, consulting projects in supply chain management, product lifecycle management, and architecture consulting. We have developed strengths in ERP Audits, Risk Management and Compliance consultancy services and Activity based costing.
Diversified financial services:
In the Diversified Financial Services domain we create applications through IT, support through BPO, and manage change through consulting. KPIT Cummins' has a strong lineage in the financial industry - being a descendant of KPCA, one of the country's most prominent accounting firms providing financial services to national and global banks since the past six decades. Our business consultants have extensive experience in securities services, retail banking, credit cards, fund administration, leasing and finance, insurance.
Business Process Outsourcing:
Company is involved into Knowledge Based outsourcing in Risk Management & Compliance Services, Sarbanes Oxley, SAS-70 Compliance, BS7799, Internal Controls, Audits related to Business & IT Processes, Business Intelligence & Data Analytics, Business Process Transformation Services, Skills & Rules Based, Finance & Accounting and Related Services, Transaction Management, General Accounting, Financial Reporting, Financial Analysis, Human Resource Managed Services, Compensation & Benefits, 401(K) & Retirement Services, Employee Stock Options (ESOP), Stock Options Management / Administration, Human Resourcing Activities, Human Resource Administrative Activities, Transaction Processing Services, Mortgage, Insurance. In technology based services company has presence in Security Operations Center, Network Operations Center and Technical Help Desk.

Recent developments—
KPIT Cummins has acquired substantial part of mechanical design services business of Harita TVS Technologies, a part of the TVS Group. Harita TVS offers design services under two segments viz, automotive and construction and industrial machinery.
KPIT Cummins Infosystems, product engineering partner to the automotive industry and VaST, a player in electronics virtualisation, have announced a partnership to deliver electronic virtualisation tools and specialised services to global automotive OEMs, and Tier-1 suppliers and ODMs. The partnership between VaST and KPIT focuses on methodology adoption services that speed up the deployment of advanced virtual prototyping tools and methodologies such as networked ECU Virtual-Hardware-In-the-Loop simulations. Electronic virtualisation is highly effective in reducing engineering costs while simultaneously enabling improved end-system software quality.
Valuation—
A relationship-based and vertical focused business model (Focus on two verticals: Manufacturing & Diversified Financial services) has helped the company to grow at a fast pace with top line revenue growth of 10x and increase in market capitalization of 15x over the last 5 years. Its 95 plus active global clients and strategic partnerships with some of the largest & renowned players in their respective areas are a testimony to its business model.
At CMP, stock trades at very attractive valuation of 6.42 P/E multiple of its FY2010 Estimated Earnings. We recommend investors to “Strong BUY” “KPIT Cummins” for medium to long-term investment horizon.

Source: Internet (Valuenotes by Abhishek Jain)

Stock Idea:Vivimed Labs Ltd.

Vivimed Labs Ltd (Rs 92)
(BSE Code- 532660 NSE Code- VIVIMEDLAB)
(P/E- 3.3, Promoter's stake- 58.44%, Mkt Cap- Rs86 cr)
Vivimed Labs Ltd (VLL) is a leading manufacturer and exporter of an API, viz. Triclosan. Apart from Triclosan, it also manufactures other Specialty Active Ingredients such as Avis, Chlorophenesin, NDGA and CaGP. Vivimed caters to both domestic as well as Export markets and its major customers are Hindustan Unilever Ltd., Anchor Healthcare, Marico Industries, Unilever, Harmet International Inc., USA, Benckiser (North America) etc. Vivimed has a strong product portfolio catering to need of various segments like: Oral care (Triclosan - anti microbial agent, Calcium Glycerophosphate - dental enamel protection), Skin care (clinbazole - anti fungal agent, Vicrol - hair dye coupler) and Hair care (Avis- UV protection cream). VLL manufactures ingredients mainly for the Cosmetic industry which has been growing at an accelerated pace for the last few years. Due to this, the company is experiencing continuous increase in demand for its products
VLL is based out of Karnataka with its manufacturing plants in Bidar (Karnataka), Medak and Bonthapally (AP). The Research and Development (R&D) which is the key success factor for this company was set up to support its manufacturing. Vivimed has a state of art laboratory in Hyderabad with about 35 highly qualified professionals with experience in diverse fields of organic synthesis, analytical knowledge, microbiology & formulations, who conduct and supervise research. Triclosan (Viv-20) is the bread earner for Vivimed. It is the most widely used antibacterial, which goes into Oral care, personal hygiene and cosmetics. In July 2005, Vivimed came out with a public issue at Rs 70 per share for the expansion of Triclosan capacity. Globally Ciba Speciality Chemicals, Switzerland is a largest player in Triclosan with 75% market share while Vivimed has 12% market share. Another speciality product manufactured by VLL is Avis, which improves UV absorbing ability of Sunscreen and make them more effective. L' Oreal is a main client for Avis. It has also approved Vivimed as Global Supplier to L'Oreal- France.
For the year ended March 2009, the company had posted net sales of Rs 280 cr.. and net profit of Rs 22 cr. on consolidated basis. On a equity capital of 9.4 cr.(Promoters'stake-58.44%), the EPS stood at Rs 23.4 and the dividend declared is 15%. For the Q1 ended June 2009, VLL has posted a 65% rise in net profit to Rs 6.96 cr. on a 50% rise in net sales to Rs 78.96 cr. on consolidated basis. During the first quarter, FCCB's of USD 12.5 million were bought back and cancelled. Of the total issue, bonds worth USD 12.5 mn were bought back and Bondholders opted for conversion of balance Bonds worth USD 2.5 mn into equity shares. The Company in its Board Meeting held on August 31, 2009 considered allotment of equity shares to the Bondholder and has issued 5,63,918 equity shares of the Company, converted at Rs 185 per equity share.
Vivimed Labs is a niche player focused on manufacturing of ingredients for various segments of cosmetic products. It has show a steady growth in its revenues and earnings over the past four years and also established itself as a supplier to some globally leading cosmetic companies like L'Oreal, Revlon etc. Vivimed has a sustainable business model, which is scaleable .The demand for products are buoyant with little pressure on the pricing. In February 2008, Vivimed announced acquisition of James Robinson, a subsidiary of UK-based global chemicals major Yule Catto & Co. for about $30 million. The company has a leadership position in the Hair Dyes and Intermediate segments. The Personal Care products of James Robinson complement Vivimed's strong portfolio of active ingredients for this sector and this acquisition will be EPS accretive.
Going forward, VLL has decided to introduce new products at regular intervals. It has short-listed six active ingredients in the Sunscreen range for development, marketing & sales. It's also exploring the possibilities of offering `custom blends' for large personal care product manufacturing company. Vivimed's vision is to become a major supplier for speciality chemicals. Focus remains on personal care and cosmetics and this is a good proposition. With its R&D and high skill expertise VLL is set for decent growth. In terms of valuations, the scrip is available at 3.9 times x its FY09 earnings(Rs 23.4) and at 3.1 times FY10E earnings(Rs 29-30) and holds good potential for appreciation in the medium term. Investors can start accumulating the stock at current levels and add more on declines for decent returns of 50%-60% over the next 6-8 months.

Source: Internet (Valuenotes by Sanjay Chhabria)