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What’s the theme?
NIIT Tech has large exposure to high-growth niche verticals such as insurance and travel. New service
lines would boost non-linear growth and lead to improvement in realizations. NIIT Tech has no exposure to
the PIIGS zone and it 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 of Rs2,280mn; 2) Good performance in the
Insurance and travel and transport verticals, which contribute ~72% to revenue; 3) Large untapped
opportunity in the APAC markets, which are expected to be highest IT spenders in CY10; 4) Strong order
book and high growth in top 10 clients; and 5) Stable EBIDTA margins in the IT services business.
Where are we stacked versus consensus?
Our top-line estimates vary from consensus by ~4.8%, underpinned by stronger volumes and modest
uptick in pricing for FY12. Our EBITDA margin estimate for FY12 is 20.6% which is in line with consensus.
Our FY12 EPS estimate is 4.9% higher than consensus.
What will challenge our target price?
1) Slower recovery in Europe; 2) Sharp currency volatility; 3) Higher attrition and wage increments; and 4)
Project delays and cancellation of government contracts.
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