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NIIT (NIIT.BO; Rs54.95; 1M)
Takeaways from Mumbai – NIIT presented at our India Investor Conference in
Mumbai. Below are key takeaways.
Transition phase – Company has been in transition for some time now. The focus
has been on higher margins through volume growth, product mix change, shared
capacity (OneNIIT initiative) and new delivery models. Management is trying to
improve the ROCE by improving on the margins and by better capital deployment.
The company is expected to remain in transition in 1QFY12 – margins may be
weaker.
Focus on SLS (school learning solutions) – This remains the biggest area of
focus. Company continues to be selective in the government schools space – the
receivables which were expected to come from one of the states have come
through. On the other hand, NIIT is doing well in the private schools space – a much
more lucrative segment.
ILS (individual learning solutions) picking up – There is good traction in the ILS
space with enrollments meaningfully up on a YoY basis. The company has not taken
a price hike this year (unlike FY11) as the focus clearly is on accelerating revenue
growth. IFBI is doing well and the other businesses are also expected to break even
by the end of the year (FY12). The guidance for this segment is ~18% revenue
growth with flattish to slight improvement in margins.
CLS (corporate learning solutions) getting traction – The managed services and
online library segment are getting a lot of traction – these are the higher margin
businesses within the CLS bouquet. The FY12 guidance for this segment is for
~15% YoY volume growth and a margin improvement of ~100-150bps.
Skills development – The company has launched an initiative in the skills
development area in line with the NSDC (National Skill Development Corporation)
mandate. This segment, however, will take time to play out.
Maintain Buy – With the volume growth and increased attrition witnessed across
the IT sector, NIIT’s ILS business will have a rub-off effect. With the segment
contributing 60%+ of the operating profits, we find the stock attractive at ~9x FY12E
EPS.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
NIIT (NIIT.BO; Rs54.95; 1M)
Takeaways from Mumbai – NIIT presented at our India Investor Conference in
Mumbai. Below are key takeaways.
Transition phase – Company has been in transition for some time now. The focus
has been on higher margins through volume growth, product mix change, shared
capacity (OneNIIT initiative) and new delivery models. Management is trying to
improve the ROCE by improving on the margins and by better capital deployment.
The company is expected to remain in transition in 1QFY12 – margins may be
weaker.
Focus on SLS (school learning solutions) – This remains the biggest area of
focus. Company continues to be selective in the government schools space – the
receivables which were expected to come from one of the states have come
through. On the other hand, NIIT is doing well in the private schools space – a much
more lucrative segment.
ILS (individual learning solutions) picking up – There is good traction in the ILS
space with enrollments meaningfully up on a YoY basis. The company has not taken
a price hike this year (unlike FY11) as the focus clearly is on accelerating revenue
growth. IFBI is doing well and the other businesses are also expected to break even
by the end of the year (FY12). The guidance for this segment is ~18% revenue
growth with flattish to slight improvement in margins.
CLS (corporate learning solutions) getting traction – The managed services and
online library segment are getting a lot of traction – these are the higher margin
businesses within the CLS bouquet. The FY12 guidance for this segment is for
~15% YoY volume growth and a margin improvement of ~100-150bps.
Skills development – The company has launched an initiative in the skills
development area in line with the NSDC (National Skill Development Corporation)
mandate. This segment, however, will take time to play out.
Maintain Buy – With the volume growth and increased attrition witnessed across
the IT sector, NIIT’s ILS business will have a rub-off effect. With the segment
contributing 60%+ of the operating profits, we find the stock attractive at ~9x FY12E
EPS.
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