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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
BFSI and travel and 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 FY12 top-line estimate varies from consensus by ~2.4%, underpinned by stronger volumes and
modest uptick in pricing. Our FY12 EBITDA margin estimate is 22.1% higher than consensus estimate of
20.3%. Our FY12 EPS estimate is 12.7% 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 �� ��
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
BFSI and travel and 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 FY12 top-line estimate varies from consensus by ~2.4%, underpinned by stronger volumes and
modest uptick in pricing. Our FY12 EBITDA margin estimate is 22.1% higher than consensus estimate of
20.3%. Our FY12 EPS estimate is 12.7% 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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