NIIT Technologies Ltd. (NIIT Tech)|Q2FY15 Result Update | Recovery seems to have push further...Mixed Q2FY15 Performance: Downgrade to SELL with TP of Rs.326 from Rs.414 :: IndiaNivesh

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NIIT Tech reported revenue of Rs.5,883 mn, up 1.9% Q/Q. EBITDA margin expanded
55 bps Q/Q to 14.0% (v/s INSPL est. 13.2%) led by better than expected revenue
growth. As expected, U.S delivered flat volume growth on account of descaling of
two large clients. However, this was partially offset by 2.1% Q/Q volume growth
in Europe. Row delivered ~3.0% Q/Q volume growth on back of Airport Operations
Control Centre (AOCC) revenue. During the quarter, forex loss stood at Rs18 mn
(v/s Rs1 mn in Q1FY15). As a result, despite increase in cash balance, the company
reported negative other income of Rs 4 mn (v/s positive Rs36 mn in Q1FY15). Net
profit went down 7.4% Q/Q to Rs 401 mn (v/s Rs. 432 mn in Q1FY15). Depreciation
expenditure went up 34.3% Q/Q to Rs.254 mn due to expensing of Airport
Operations Control Centre (AOCC) related hardware and software capex. During
the quarter, tax rate stood at 27.3% (v/s 26.1% in Q1FY15). The company registered
fresh orders worth of $103 mn and added five new customers in the US and India.
Slowdown in current quarter revenue growth momentum could lead to muted
revenue growth in FY15. The growth in revenue is likely to pick-up only in FY16.
Key Conference Call Takeaway
Flat 12M Executable Order- Book
 On account of key clients ramp-down, NIIT Tech demonstrated only 1.0% Q/Q
(to $298 mn) growth in 12M executable order book. This reduces the overall
revenue visibility of the company. Expecting this we have already reduced
our FY15 estimates, during the last quarter and forecasted flat rupee revenue
growth for FY15E. We continue to maintain the same stance during the quarter
and maintain our FY15E/FY16E estimates. Management expect 2HFY15 to be
better than 1HFY15 on account of signs of recovery in US and significant
opportunities in the emerging markets.

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