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For 2QFY2012, NIIT reported modest performance, which was in-line with our
expectations. Revenue growth was driven by all businesses, but operational
performance was dented due to the ILS business, which posted a 273bp yoy dip
in EBITDA margin. The company will be getting US$75mn as net income from the
divestment of Element K business, which the company will use to reduce its debt
by `250cr. We maintain our Buy rating on the stock.
Quarterly highlights: For 2QFY2012, NIIT reported consolidated revenue of
`384cr, up 19.5% yoy. Revenue from ILS, SLS and CLS businesses increased by
11.9%, 12.4% and 9.6% yoy to `180.2cr, `40.5cr and `163.0cr, respectively.
Blended EBITDA margin of NIIT improved by 501bp yoy to 14.6% on the back of
margin expansion in SLS as well as CLS businesses. These gains in margins by the
CLS and SLS businesses were partially overshadowed by margin decline in the ILS
business and higher operating expenses due to facility overlap and some
pre-operative expenses related to skill building solutions.
Outlook and valuation: The hiring environment in the Indian IT sector is
strengthening, as indicated by Indian IT players such as Infosys and TCS aiming
to collectively hire ~1,05,000 people in FY2012. Thus, we expect ILS to record
strong growth of 16% yoy in FY2012, with strengthening of the hiring
environment expected to result in demand for vocational courses. NIIT is
strategically moving towards turning asset light by targeting more annuity-based
revenue. Management aims to do so by being selective in government SLS
contracts, which are highly capital-intensive and have long debtor cycles (thus
impacting returns), targeting more private schools in the SLS business. We have
valued NIIT on an SOTP basis, arriving at a target EV/EBITDA of 3.5x on
FY2013E consolidated EBITDA of `176.4cr, arriving at a target price of `60.
We maintain our Buy rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
For 2QFY2012, NIIT reported modest performance, which was in-line with our
expectations. Revenue growth was driven by all businesses, but operational
performance was dented due to the ILS business, which posted a 273bp yoy dip
in EBITDA margin. The company will be getting US$75mn as net income from the
divestment of Element K business, which the company will use to reduce its debt
by `250cr. We maintain our Buy rating on the stock.
Quarterly highlights: For 2QFY2012, NIIT reported consolidated revenue of
`384cr, up 19.5% yoy. Revenue from ILS, SLS and CLS businesses increased by
11.9%, 12.4% and 9.6% yoy to `180.2cr, `40.5cr and `163.0cr, respectively.
Blended EBITDA margin of NIIT improved by 501bp yoy to 14.6% on the back of
margin expansion in SLS as well as CLS businesses. These gains in margins by the
CLS and SLS businesses were partially overshadowed by margin decline in the ILS
business and higher operating expenses due to facility overlap and some
pre-operative expenses related to skill building solutions.
Outlook and valuation: The hiring environment in the Indian IT sector is
strengthening, as indicated by Indian IT players such as Infosys and TCS aiming
to collectively hire ~1,05,000 people in FY2012. Thus, we expect ILS to record
strong growth of 16% yoy in FY2012, with strengthening of the hiring
environment expected to result in demand for vocational courses. NIIT is
strategically moving towards turning asset light by targeting more annuity-based
revenue. Management aims to do so by being selective in government SLS
contracts, which are highly capital-intensive and have long debtor cycles (thus
impacting returns), targeting more private schools in the SLS business. We have
valued NIIT on an SOTP basis, arriving at a target EV/EBITDA of 3.5x on
FY2013E consolidated EBITDA of `176.4cr, arriving at a target price of `60.
We maintain our Buy rating on the stock.
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