Visit http://indiaer.blogspot.com/ for complete details What’s the theme?
NIIT Tech has large exposure to high-growth niche verticals such as insurance and travel. New service
lines will boost the non-linear growth and lead to improvement in realisations. NIIT Tech has no exposure
to the PIIGS zone and has been able to achieve volume growth in Europe despite economic headwinds.
What will move the stock?
1) Recent wins in the Indian market: five-year BSF contract worth Rs2,280mn; 2) Good performance from
the Insurance and Travel and transport verticals that contribute ~72% to revenue; 3) Large untapped
opportunity in the APAC markets that are expected to be the highest IT spenders in CY10; 4) Strong order
book and high growth in the top 10 clients; and 5) Stable EBITDA margins in the IT services business.
Where are we stacked versus consensus?
Our top-line estimates vary from consensus estimates by ~4.6% underpinned by stronger volumes and a
modest uptick in the pricing for FY12. Our EBITDA margin estimates for FY12 are lower than consensus
by ~70bps as we expect higher salary increases and promotions. Our FY12EPS estimate is in line with
consensus.
What will challenge our target price?
1) Slower recovery in the European economy; 2) Sharp currency volatility; 3) Higher attrition and wage
increments; and 4) Project delays and cancellations in government contracts.
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