NIIT Ltd. (NIIT)|Q2FY15 Result Update | Q2FY15 Result above estimate: Revival in business model continues; reasonable upside: Maintain BUY :: IndiaNivesh

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At CMP of Rs.46, the stock is trading at 13.0x FY15E and 11.4x FY16E earnings
estimate. We like the company’s CSL segment performance along with slight revival
in ILS and SLS segment. However, the company’s dependence on IT heavy business
model is taking more than expected time to show turnaround. Additionally, reduction
in government school business led to some decline in overall revenue. We remain
positive on NIIT’s recent initiatives - (1) increasing presence of Non-IT business in
ILS segment, (2) reduction of capex intensive government school business, and (3)
high growth in MTS business. The actual benefits of these developments experienced
delays due to IT industry slowdown. However, slight uptake in discretionary budget
could trigger fresher’s hiring. On back of sizeable upside from our target price of
Rs.55, we upgrade our rating to BUY from HOLD.


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