KPIT Technologies Vs Tata Elxsi: Who doesn’t like Nature? The greener the better we feel, breathe, and freshness. Embracing ourselves with nature will benefit our livelihood for good. Climate Change has wreaked havoc across the world and Companies are moving towards a greener future by adopting Solar, Thermal, and Nuclear as a source of energy replacing fossil fuels.
Today, In our article, we are comparing fundamentally the companies making a change in the Electric IT Mobility Industry – KPIT Technologies Vs Tata Elxsi.
Table of Contents
KPIT Technologies Vs Tata Elxsi – A Comparative Analysis
At first, we will look into when the companies are established, what services they are offering to the Electric IT Mobility Industry, and fundamentally analyse the companies to arrive at a conclusion.
KPIT Technologies Limited
The Company was co-founded in the year 1990 by Ravi Pandit (Chairman), Kishor Patil (CEO and Managing Director), and Sachin Tikekar (President and Joint Managing Director).
They work with Auto OEMs by providing services in Product Engineering & Embedded Software which is basically designed specifically to perform certain instructions.
Their solutions include Autonomous Driving & ADAS, Integrated Diagnostics and Aftersales Transformation [iDART], Electric and Conventional Powertrain, Vehicle Engineering and Design, Connected Vehicles, AUTOSAR, and Digital Connected Solutions.
Business Segments
The Company entirely focuses on Software Defined Vehicles by earning revenue in Passenger Cars – 76% & Commercial Vehicles – 24% in FY 2022-23. They have a presence across continents from the USA – 36%, Europe – 47%, and Asia – 18.5% revenue share from these locations as per FY 2022-23.
Research & Development
KPIT Technologies has been actively invested in R&D such as Hydrogen Generation from Biomass, Sodium-ion Battery, and Hydrogen Fuel Cell. Sodium-ion batteries are a potential game-changer in the EV Industry if there are promising results as this can bring down the costs of a battery. Lithium-ion batteries cost more as it involves the extraction of material and the use of cobalt to store electricity in Batteries.
Tata Elxsi
The Company commenced its services in 1989 under the helm of Tata Group. The company entered into development and engineering service providers in automotive, media, broadcast, communications, and healthcare.
The company works with various customers to deal with IoT (Internet of Things), Cloud Development, Cybersecurity, Smart Mobility, and Artificial Intelligence. Their solutions include Distribution, delivery, and Ad monetization for Media and OTT service providers.
SDWAN, RDK, SDN, Network transformation for telecommunication, Offering CASE (connected, autonomous, shared, and electric) vehicles, software engineering, system engineering for passenger & highway vehicles, Providing technology, design, and regulatory services to devices used in Medical and healthcare field.
Business Segments
The company earns its revenue from Software development and services which comprises 97% and the remaining 3% from System integration and support services for FY23. The company earned their revenue across geographies like India – 16.6%, U.S.- 42%, Europe-36.2%, Others-5.2% in FY 23.
Industry Analysis
We are witnessing tremendous growth and change in the use of Vehicles. The world suffering from Climate change has made a mandatory shift towards using Electric Vehicles.
Encouragement from the Indian Government to subsidize electric vehicles, import curb, and Production Linked Incentive Schemes help manufacturing and embracing Industry.
Artificial Intelligence is used for better enhancement in Quality which is ever-evolving in a growing industry. The automobile sector is witnessing growth due to adopting the use of sophisticated technologies like self-driving and an increase in Safety Precautions by using advanced sensors and cameras such as Anti-collision systems and anti-braking systems.
Nonetheless, the spending by Automobile companies on the Software-defined vehicles segment is on a higher trajectory and unlikely to slow down even in the case of a slowdown in the Automobile Industry.
KPIT Technologies Vs Tata Elxsi – Financials
Revenue & Net Profit
KPIT Technologies reported revenue of Rs.3365cr in FY23 against Rs. 2432cr in FY22 indicating an increase of 38.36% YoY. Its Profitability increased to Rs.386.86cr in FY23 from Rs.276.24cr with an increase of 40%.
Tata Elxsi reported an increase of 27% in revenue from 2471 cr in FY22 to 3144 cr in FY23. Its Profitability has substantially increased from 755.19 cr in FY23 to 549.67 cr in FY22, increasing 37.38%.
The comparison between the two companies projects KPIT Technologies has increased their revenue and profitability by a huge margin but Tata Elxsi having revenues diversified makes risk appetite better in case of a downward trend in the Industry.
| Particulars/ Financial Year | 2019 | 2020 | 2021 | 2022 | 2023 | CAGR (4 Years) |
|---|---|---|---|---|---|---|
| KPIT Technologies - Revenue (Cr) | 641.26 | 2156.17 | 2035.74 | 2432.39 | 3365.04 | 51.37% |
| YoY Growth(%) | - | 236.24% | -5.59% | 19.48% | 38.34% | |
| Tata Elxsi - Revenue (Cr) | 1596.93 | 1609.86 | 1826.16 | 2470.8 | 3144.72 | 18.45% |
| YoY Growth(%) | 15.19% | 0.81% | 13.44% | 35.30% | 27.28% | |
| KPIT Technologies - Net Profit (Cr) | 55.02 | 147.77 | 147.1 | 276.24 | 386.86 | 62.87% |
| YoY Growth(%) | - | 168.57% | -0.45% | 87.79% | 40% | |
| Tata Elxsi - Net Profit (Cr) | 289.97 | 256.1 | 368.12 | 549.67 | 755.19 | 27.02% |
| YoY Growth(%) | 20.80% | -11.68% | 43.74% | 49.32% | 37.39% |
Profit Margins
Operating Margins (OPM) of KPIT and Elxsi are 18.80% and 30.5% in FY23. Elxsi has far better margins than KPIT. With Elxsi the OPM has been constant for the last 3 years and KPIT is in increasing trend from the past 5 years with an Average of 15.16%.
KPIT and Elxsi have Net Profit Margins (NPM) of 11.5% and 24.01% in FY23. Elxsi has an upper hand in NPM as well and in comparison with KPIT, the margins of both companies can tend to slow down due to a slowdown in the global economy.
| Particulars/ Financial Year | 2019 | 2020 | 2021 | 2022 | 2023 | Average (5 Years) |
|---|---|---|---|---|---|---|
| KPIT Technologies - OPM (%) | 11.08% | 13.32% | 15.08% | 17.56% | 18.80% | 15.16% |
| Tata Elxsi - OPM (%) | 26% | 21% | 28.66% | 31% | 30.50% | 27.43% |
| KPIT Technologies - NPM (%) | 8.58% | 6.85% | 7.23% | 11.36% | 11.50% | 9.10% |
| Tata Elxsi - NPM (%) | 18.16% | 15.91% | 20.16% | 22.25% | 24.01% | 20% |
Return Ratios
RoE of KPIT and Elxsi stands at 26.55% and 40.97% in FY23. RoCE shows 35.12% and 51.8% in FY23 respectively.
Based on both the metrics, Elxsi has superior returns than KPIT. However, KPIT is still in its initial stage and has more potential to increase its returns while Elxsi has been constant over the years.
| Particulars/ Financial Year | 2019 | 2020 | 2021 | 2022 | 2023 | Average (5 Years) |
|---|---|---|---|---|---|---|
| KPIT Technologies - RoE | 11.47% | 14.75% | 13.15% | 22.26% | 26.55% | 17.63% |
| Tata Elxsi - RoE | 34.50% | 25.20% | 30.15% | 37.23% | 40.97% | 33.61% |
| KPIT Technologies - RoCE | 13.58% | 18.23% | 16.82% | 28.86% | 35.12% | 22.52% |
| Tata Elxsi - RoCE | 51.68% | 35.35% | 42.50% | 51.20% | 51.80% | 46.50% |
Debt Analysis
Typically Information Technology(IT) companies have Low or No Debt as compared to Other Industries. IT Companies possess huge capital infusion from promoters, Private Equity firms, or raise capital from the public and they are less likely to have Assets that generate Income like Machinery or Any Assets that are likely to have Value addition to the profit. Banks take collateral before lending any loans and IT Companies main assets are the employees who account for the majority part of their expenses.
| Particulars/ Financial Year | 2019 | 2020 | 2021 | 2022 | 2023 | Average (5 Years) |
|---|---|---|---|---|---|---|
| KPIT Technologies - D/E | 0.14 | 0.06 | 0 | 0 | 0.03 | 0.04 |
| Tata Elxsi - D/E | 0 | 0 | 0 | 0 | 0 | 0 |
| KPIT Technologies - Interest Coverage | 10.69 | 10.11 | 11.3 | 18.76 | 16.37 | 13.44 |
| Tata Elxsi - Interest Coverage | 418.73 | 52.72 | 73.58 | 72.19 | 55.23 | 134.49 |
Future Plans
KPIT Technologies
> The Company management is actively in pursuit of strategic partnerships which resulted in the onboarding of Renault and Honda Japan for the development of Software Defined Vehicles (SDV) & expected to provide services till 2026 and 2030.
> Access to semiconductor technologies and providing the high complex value of performance engineering from the acquisition of Pathfinder to aid growth in OEM customers.
> KPIT and ZF invested in a company named “QORIX” which will aid in the development of the Automotive middleware stack. This development further enhances the productivity of software developers.
> The product development in ADAS and HAD products has a potential 11.3% CAGR from 2019-2030 and would be a driving force for the expansion of the company.
Tata Elxsi
> The Management is positive about the growth of Software Defined Vehicle in the OEM category and would like to significantly increase their share in 3 to 5 years indicating an increase in investments as well.
> Cloud Computing, Artificial Intelligence, and Internet of Things (IoT) will significantly aid in improvement sectors such as Healthcare and transportation and are likely to aid revenue as well.
> The demand from the Automobile sector is expected to rise from the services provided to OEMs in a way that benefits the manufacturers to earn revenue from Subscription-based models.
> Cybersecurity services is an emerging and ever-growing sector and they have been in partnership to develop automotive cybersecurity solutions for better expansion.
Key Metrics Of KPIT Technologies Vs Tata Elxsi
With the understanding of companies businesses, Let’s take a look at some of the key metrics.
| Particulars | KPIT Technologies | Tata Elxsi |
|---|---|---|
| CMP | Rs.1,215.6 | Rs.7,339 |
| Market Cap (Cr.) | Rs.31,444 | Rs.45,473 |
| EPS | Rs.15.67 | Rs.121.93 |
| Stock P/E | 73.17 | 59.89 |
| RoE | 26.55% | 40.97% |
| Price to Book Value | 17.83 | 19.99 |
| Promoter Holding | 39.47% | 43.92% |
Conclusion
Coming to the end of our analysis, we can look at both companies. KPIT Technologies Vs Tata Elxsi are on the cusp of grabbing a share which relates to the future growth of Electric Mobility.
KPIT is wholly dedicated to providing its services to OEMs and Elxsi is catching up with aid from Industry growth as well. The high optimism in these stocks has taken their valuations too high within a short time period. Are the companies leading the front of the growth curve in EVs? Can these companies sustain a high growth period for how many years? Let us know your view on this.
Written By Santhosh
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Good article. Results in a few days for both companies should give more insights on the growth ahead.
Very good analysis and comparison.
I hold Tata Elixi. Good article.I like it, and dicided to hold, for long term.