NIIT Technologies (NIIT Tech) reported revenues softer than expected, whereas
margin was ahead of expectation. The company reported order intake of $377m,
against average of ~$100m. We retain our ‘BUY’ rating with a revised TP of Rs470.
Revenue growth muted, margins ahead: NIIT Tech reported a muted revenue
growth (-0.8% in USD terms) QoQ to Rs5,873m (PLe: Rs5,991m, Cons:
Rs5,962m). EBITDA margins expanded by 121bps to 16.2% (PLe: 16.2%, Cons.:
15.1%), driven by lower hardware pass-thru revenue. PAT decline by 14.9% QoQ
to Rs531m (PLe: Rs595m, Cons.: Rs595m), due to lower other income.
Order book strongest ever, 3x higher than average: Order book for NIIT Tech
swelled to $377m, compared to average of ~$100m, driven by one large deal of
in BFSI/US of $300m (New Scope: $30m). The management said that the deal
could further add to the order book in subsequent quarters.
Strategic focus to accelerate growth: NIIT Tech is aspiring for $1bn revenue
opportunity by FY17. Three prong strategy involves 1) Positioning for expanding
its presence in the US 2) Increased focus on strong verticals like TTL and BFSI 3)
Investing for opportunities in IMS.
Margin expansion likely to continue: The management expects steady
improvement in margin driven by lower hardware revenue and higher US/UK
revenue. We factored in 40bp improvementin marginsfor FY15.
Isit a time forre‐rating? The company has been on the steady path of recovery
in terms of operating margin, cash conversion and deal wins in FY14. We expect
strong order book would improve the revenue visibility in FY15 and demonstrate
the ability of the company to consummate the large deals. A new beginning. We
will waitforfew more silverlinesto push forward an argumentforre‐rating.
Valuation & Recommendation – Reiterate “BUY” with revise target price of
Rs470: Positive IATA commentary, improved deal pipeline and AAI project rampup would give steady revenue growth with steady margin improvement. It is
currently trading at 7.5x FY16E earnings with an EPS CAGR of 14% (FY14-16E).
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margin was ahead of expectation. The company reported order intake of $377m,
against average of ~$100m. We retain our ‘BUY’ rating with a revised TP of Rs470.
Revenue growth muted, margins ahead: NIIT Tech reported a muted revenue
growth (-0.8% in USD terms) QoQ to Rs5,873m (PLe: Rs5,991m, Cons:
Rs5,962m). EBITDA margins expanded by 121bps to 16.2% (PLe: 16.2%, Cons.:
15.1%), driven by lower hardware pass-thru revenue. PAT decline by 14.9% QoQ
to Rs531m (PLe: Rs595m, Cons.: Rs595m), due to lower other income.
Order book strongest ever, 3x higher than average: Order book for NIIT Tech
swelled to $377m, compared to average of ~$100m, driven by one large deal of
in BFSI/US of $300m (New Scope: $30m). The management said that the deal
could further add to the order book in subsequent quarters.
Strategic focus to accelerate growth: NIIT Tech is aspiring for $1bn revenue
opportunity by FY17. Three prong strategy involves 1) Positioning for expanding
its presence in the US 2) Increased focus on strong verticals like TTL and BFSI 3)
Investing for opportunities in IMS.
Margin expansion likely to continue: The management expects steady
improvement in margin driven by lower hardware revenue and higher US/UK
revenue. We factored in 40bp improvementin marginsfor FY15.
Isit a time forre‐rating? The company has been on the steady path of recovery
in terms of operating margin, cash conversion and deal wins in FY14. We expect
strong order book would improve the revenue visibility in FY15 and demonstrate
the ability of the company to consummate the large deals. A new beginning. We
will waitforfew more silverlinesto push forward an argumentforre‐rating.
Valuation & Recommendation – Reiterate “BUY” with revise target price of
Rs470: Positive IATA commentary, improved deal pipeline and AAI project rampup would give steady revenue growth with steady margin improvement. It is
currently trading at 7.5x FY16E earnings with an EPS CAGR of 14% (FY14-16E).
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