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NIIT TECH: BUY, TP-Rs300 (56% upside)
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 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
BFSI and travel & transport verticals, which contribute ~73% to revenue; 3) Large untapped opportunity in
the APAC markets, which are expected to be highest IT spenders in CY11; 4) Strong order book and high
growth in top 10 clients; and 5) Stable EBIDTA margins at 22% in the IT services business, highest among
mid tier peers.
Where are we stacked versus consensus?
Our top-line estimates vary from consensus by ~4.4%, underpinned by stronger volumes and modest
uptick in pricing for FY12. Our EBITDA margin estimate for FY12 is 22.1% higher than consensus estimate
of 20.7%. Our FY12 EPS estimate is 13% 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
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
NIIT TECH: BUY, TP-Rs300 (56% upside)
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 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
BFSI and travel & transport verticals, which contribute ~73% to revenue; 3) Large untapped opportunity in
the APAC markets, which are expected to be highest IT spenders in CY11; 4) Strong order book and high
growth in top 10 clients; and 5) Stable EBIDTA margins at 22% in the IT services business, highest among
mid tier peers.
Where are we stacked versus consensus?
Our top-line estimates vary from consensus by ~4.4%, underpinned by stronger volumes and modest
uptick in pricing for FY12. Our EBITDA margin estimate for FY12 is 22.1% higher than consensus estimate
of 20.7%. Our FY12 EPS estimate is 13% 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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