NIIT: Training in demand :: Centrum

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NIIT: Training in demand


NIIT’s Q2FY11 results were in line with our estimates.
The pick-up in volumes in Corporate Learning Solutions
bodes well for the growth outlook of the company. We
reiterate our Hold rating but increase our target price to
Rs74 (from Rs69), implying a P/E of 11.2x FY12E
earnings to factor in improvement in EBITDA growth
(18% CAGR over FY10-13E) and return on equity to
18%.
􀂁 Results in line with expectation: Both sales and
profits were in line with expectations. Within segments,
Corporate Learning Solution (CLS) and Individual
Learning Solution (ILS) compensated for the weak
performance of School Learning Solution (SLS).
􀂁 Growth in volumes and order flow for CLS segment
bodes well: The CLS segment reported 10.6% growth
in sales and 32bp expansion in EBITDA margin to 8.2%
in Q2FY11. Pending order book shows improvement of
10.8% YoY to US$92mn (57% executable over 12
months). The management has guided on
improvement in volume growth above 6% for FY11E.
􀂁 Marginally change our earnings to adjust for
growth in Corporate Learning Solution: We have
tweaked our revenue growth assumptions to factor in
lower revenue in SLS and higher growth in CLS as well
as effective tax rate which results in descrease in net
profit by 6.5% in FY12E.
􀂁 Reiterate Hold; Increase target price to Rs74: We
revise our fair value to Rs74 (from Rs69 per share) to
factor in the increase in net profit for FY12E and revival
of growth prospects of ILS and CLS. We have not
changed our rating to Buy as we are concerned over
the global economic environment (50% of revenue
comes from outside India).