NIIT Technologies Ltd. (NIIT Tech) | Q3FY15 Result Update | In-line Performance; Maintain SELL with TP of Rs.326… :: IndiaNivesh

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NIIT Technologies - Light at the End of the Tunnel; Result Update Q3FY15 :: Edelweiss, report

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Accumulate NIIT TECHNOLOGIES :: Kotak Sec,report

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NIITT's operational results were lackluster and came in marginally better
than our expectations. Apart from seasonality, continuing delays in a couple
of Insurance accounts and a T&T account impacted the revenue growth,
which came in at 1% QoQ in CC terms (2.1% in 2Q). This is the fourth
quarter of flattish-to-low services revenues. NIITT needs to tighten its
delivery organization further. The order bookings were encouraging at $109
($103mn in 2Q) and these should translate into better revenue growth,
going ahead. We tweak our earnings to Rs.37 per share for FY16 (Rs.36,
earlier) and TP to Rs.405 (Rs.396 earlier). We recommend buying the stock at
declines - ACCUMULATE (REDUCE earlier). NIITT needs to ensure better
consistency in revenue growth to attract higher valuations. The company
will have net cash of about Rs.80 per share by FY16 end, as per our
estimates

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Execution furloughs weigh… • NIIT Technologies :: ICICI Securities, report

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Signs of Stability NIIT Tech :: HDFC Sec

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Operating performance improving… • NIIT: :: ICICI Securities, PDF link

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

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NIIT Technologies Ltd - Awaiting Growth; Result Update Q2FY15 :: Edelweiss

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Hold NIIT Technologies :: ICICI Securities, PDF link

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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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REDUCE NIIT TECH ; Target Price: Rs. 396; Kotak Sec report

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NIIT Ltd - Target price revision - Valuation compellingly attractive without ILS turnaround :: Centrum

Rating: Buy; Target Price: Rs67; CMP: Rs41.9; Upside: 59.9%



Valuation compellingly attractive without ILS turnaround



We reiterate Buy on NIIT Ltd with a new TP of Rs67 based on a
Sum-of-parts valuation with Sep-16E estimates. We think valuations
have again become compellingly attractive with the recent decline in
stock price (after 1QFY15 results did not meet the high expectations
despite EBITDA being up 29.9% YoY). Even without factoring in a sharp
recovery in ILS, we find significant upside is possible for the
valuation of the core business. With over 70% of current EV being
accounted for by the holding in NIIT Technologies, we think that NIIT
Ltd’s high-growth business in Corporate Learning Services is
undervalued while its ILS recovery can add further upside to our
target price.

$ Not baking in an ILS turnaround, new estimates conservative: ILS
revenues lagged our earlier estimates in 1QFY14 and we think we were
over-optimistic on average price realization improvements from new
courses like Analytics. While we are cautiously optimistic about the
growth in Beyond-IT enrolments for the flagship GNIIT program (20% of
GNIIT enrolments over 1QFY15 were for Beyond-IT programs), we wait for
sustained improvement in overall enrolments before calling a
turnaround in ILS. We note that if a dramatic turnaround happens, that
will lend additional upside. We remain optimistic about medium-term
prospects given high fixed costs in the ILS segment and the fact that
margins were as high as 16% in FY12.

$ CLS segment margin improvement not factored in even as scale grows:
While we expect CLS segment margins to improve with scale (we expect a
200-300bps improvement given SG&A leverage possible), we have not
factored that into our estimates as 1) Continued sales investments
ahead of revenue can be expected in this high-growth segment (CAGR of
19.1% in USD terms over FY14-17E) and 2) We have modeled costs at the
company level due to the limited availability of data at the
individual segment level. Given that margins are still not at the
steady state level, we think that an EV/Sales multiple would value
this segment more fairly and we value this segment at 0.8x Sep-16E
Sales in our sum-of-parts valuation.

$ School Learning Services and Skill Building Services’ margin
improvement to be gradual: With the exit of government school
contracts, we anticipated immediate improvement in margins of School
Learning Services (SLS). But while working capital improvement has
been significant with the end of government school contracts, margin
improvement is not yet visible and management attributed this to
overheads related to government contracts that persist even as the
revenue base reduces. Breakeven in Skill Building Services (SBS/ Yuva
Jyoti) still seems some time away despite encouraging improvement in
traction (enrolments at 8,000 in 1QFY15 Vs 6,500 in 4QFY14) as center
expansion continued.

$ Estimates now conservative, but believe in structural re-rating:
While we wait for a turnaround in ILS, we think that to unlock value
from the CLS segment, a different approach is needed compared to our
earlier EV/EBITDA approach that clubbed all four segments. We still
value the ILS, SLS and SBS segments together and believe their margins
have bottomed out. We do not factor in aggressive margin expansion for
any of these segments and value them at 3x Sep-16E EBITDA and value
the CLS segment at 0.8x Sep-16E Sales. We arrive at a new TP of Rs67
based on sum-of-parts valuation using Sep-16E Sales and EBITDA
estimates (see Exhibits 3, 4 & 5) and maintain Buy rating.  Key
downside risks are continued slow conversion of CLS book to revenue
and decreases in ILS enrolments beyond what we have factored.



Thanks & Regards

--

NIIT Technologies: Services business refocus to aid margins… ICICI Securities

Services business refocus to aid margins…
NIIT Tech’s (NTL) Q3FY14 earnings gave insights on its execution strategy
to achieve the aspirational $1 billion revenue goal in the next five years.
The company seems to have streamlined its corporate agenda and has
identified key verticals, geographies and services to achieve sustainable
above-industry-average growth. NTL will focus on 1) scaling up the US
business, 2) becoming a preferred vendor in its largest verticals, BFSI and
travel, 3) driving and consolidating its presence in the IMS space and 4)
large deal focus, similar to $300 million won in Q3. However, 90% of this
win was renewal while 10% was new-scope. NTL needs several such
new-scope deals to improve its order intake run-rate given government
business defocus may pressurise order book growth in FY15E.
Result summary
Q3FY14 dollar revenues declined 0.8% QoQ to $94.8 million and were
below our $95.7 million (+0.2%) estimate led by lower hardware (PFR)
revenues while services business grew 3.6% in constant currency. Rupee
revenues were flat QoQ (| 587.3 crore) and below our 1.3% QoQ (| 595
crore) growth estimate. EBITDA margins came in at 16.3% (+121 bps
QoQ), above our 15.4% estimate, led by a mix shift towards services
revenues. Reported PAT of | 53.1 crore was below our | 54.4 crore
estimate led by lower revenue and other income loss vs. profit estimate.
NTM executable order backlog rises 6.9% QoQ
Fresh order intake of $377 million (US: $320 million, EMEA: $43 million,
RoW: $14 million) in Q3 was led by the $300 million renewal and vendor
consolidation contract from a top BFSI client in the US. This takes the
next 12 month executable order backlog to $265 million (vs. $248 million
in Q2). However, normalised Q3 fresh order intake stands at $107 million
as 90% of it was renewal while only 10% was new-scope.
Services business refocus & likely improving margin profile dictates BUY
We estimate NIIT Tech will report revenue, EPS CAGR of 15.1% each over
FY13-15E (average 16.2% EBITDA margins in FY14-15E), vs. 16.5%, 9.5%
reported during FY08-13 (average 18.4% margins). The commentary
suggests EBITDA margins could revert to their mean (staggered ~100
bps improvement every year starting FY15E) led by improving revenue
mix. Government business defocus, likely improving margin profile &
execution and ability to win large deals lead to a modest target multiple
raise to 8.7x (7x earlier) and target price revision to | 415.

NIIT Technologies Order book to drive CY14 performance, Retain “BUY” :: PL Research

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).

NIIT Technologies :TP: ` 360 Buy: Dolat Capital

View: We maintain our positive call on the stock post the earning call based
on its sustained strong growth, confidence on CY13 demand, robust order
intake and possibility of margin recovery. We maintain our BUY rating with a
TP of ` 360 valued at 7.5x of FY15E EPS of ` 48.
Confidence intact: The company is confident to do better than industry in
FY14 helped by robust 12M order executable book of USD 252mn. It expect
sustained momentum from its Manufacturing and Government clients specifically
in the US and Asia markets. Europe is likely to remain soft due to existing
economic uncertainties.
Results inline: Revenue in reported currency grew by 4.4% QQ at ` 5.4 bn
from ` 5.1 bn in Q3FY13 driven by strong growth in Government projects
(revenues up 47%, contributes 11% of revenues). Travel vertical witnessed
revenues decline of 7% as it exited 2 accounts during the quarter. Revenues
were strong across key projects and segments such as CCTNS, Morris, GIS,
ROOM solutions. However; Proyecta revenues were below par as the key
client Iberia continues to witness business ramp down.
New deal momentum on: NIIT Tech added fresh orders of about USD 110mn
during the quarter leading to USD 252mn of firm business executable over next
12 month basis. It has added 5 new clients (1 in Manufacturing, 2 each in
Transport and Government and a USD 10mn renewal from a BFSI client). The
company expects sustained demand even for the non-linear business segment
both for the managed services and transaction based services in the Morris
account.

NIIT Technologies Deal ramp‐up to give upside, Reiterate ‘BUY’ :: Prabhudas Lilladher,

NIIT Technologies (NIIT Tech) reported revenues/margin above PLe/Consensus
expectation. However, on the margin front, it disappointed due to the weakness in
GIS and insurance business. Improving revenue momentum in GIS, project ramp-up
in Morris would give the much needed revenue impetus along with margin
expansion in CY13. We retain our ‘BUY’ rating with target price of Rs350.

NIIT Technologies Deal ramp‐up to give upside, Reiterate ‘BUY’ :Prabhudas Lilladher,

NIIT Technologies (NIIT Tech) reported revenues/margin above PLe/Consensus
expectation. However, on the margin front, it disappointed due to the weakness in
GIS and insurance business. Improving revenue momentum in GIS, project ramp-up
in Morris would give the much needed revenue impetus along with margin
expansion in CY13. We retain our ‘BUY’ rating with target price of Rs350.
! Revenue growth steady, margin disappoints: NIIT Tech reported revenue
growth of 2.9% QoQ to Rs5,144m (PLe: Rs5,126m, Cons: Rs5,035m) and 4.4% on
constant currency basis. EBITDA margin contracted by 115bps to 15.8% (PLe:
16.5%, Cons: 16.1%), mainly due to softness in GIS, Insurance business and
Transition costs associated with a large engagement. However, on account of
increase in other income (revaluation of foreign currency assets & liabilities),
PAT improved by 30% QoQ to Rs560m (PLe: Rs 592m, Cons: Rs545m).
! Recovery in GIS business and revenue, post transition, to give upside: The cost
associated with large project from Morris-related transition has impacted
margin by 40bps in the quarter. We expect revenue ramp-up in Q4FY13. GIS
business delivered operating margin of -7% compared to traditionally ~20%+
due to cost over-run in a APDRP contract. The management expects margin to
be recouped by Q1FY14, as Q4 is seasonally a strong quarter for GIS.
! Conference call highlights: 1) Margins declined significantly in GIS business in
Q3FY13~(7)% (Q2FY13~1%, Q1FY13~15%) 2) Q3FY13 Revenue – Room: Rs337m,
Morris: Rs303m, Projecta: Rs144m, GIS: Rs197m, CCTNS: Rs266m 3) Hedges:
US$47.9m (@Rs56.71) 4) Sabre BPO revenue: ~Rs52m (margin: ~8-9%) 5) BFS
vertical will continue to remain soft 6) Non-linear revenue: 21% 7) DSO: 76days
8) FCF for Q3FY13: ~Rs550m 9) Volume: US: 1%, Europe: 5.7% QoQ 10) Added
four new clients, CCTNS pilot phase went live in the last week of December
! Valuation & Recommendation: NIIT Tech has made investments in the business
and now is the time to reap. Positive IATA commentary, project ramp-up in GIS,
and Morris ramp-up would give revenue growth with margin impetus. NIIT Tech
is currently trading at 7.2x FY13 estimates with EPS CAGR of 13% (FY12-14E).

NIIT Technologies Outlook steady – Retain BUY :: Prabhudas Lilladher

We met Ms. Pratibha Advani (CFO – NIIT Technologies) to understand the prevailing
business environment and future course of action for the company. According to the
management, the business outlook remains relatively subdued as the deal velocity
has slowed down due to uncertainty in the Euro zone, fiscal cliff in US and impact of
the hurricane ‘Sandy’. Despite uncertainties, the management was confident of
revenue growth in Q3FY13 in constant currency. We retain our ‘BUY’ rating

NIIT Technologies :: Prabhudas Lilladher MID-CAP top pick

TTL – Size & agility and room for positive surprise: The company has a
niche presence in Travel, Transportation & Logistic (38% revenue). A
specialized presence in the segments and small size gives room for strong
growth. It is rated as one of the most preferred vendor in the space. We
are factoring in modest growth expectation of 2.8% CQGR over the next
five quarters, despite reporting strong growth of 9% CQGR over the last 12
quarters.
Insurance – IP led growth in non-life market: NIIT Tech derives ~36% of
revenue from BFSI sector, led by 27% from Insurance. The company’s IP
(ROOM Solution) in general insurance gives them unique capability to
drive growth ahead of peers. The revenue growth has been steady at 6.5%
CQGR over the last seven quarters. We expect stronger growth for
Insurance than overall growth, yielding positive surprise on operating
margin.
Order book strength to give revenue visibility and margin stability: Order
book to be executable over next 12 months grew by 20% YoY to $240m
(@cc $254m, 27% YoY). The strong growth in order book led by fresh
order intake ($83m) improves the revenue visibility for the company for
FY13. Moreover, the management highlighted limited scope of pricing
discussion on existing order book. Hence, we see stable margin
performance with steady revenue growth beating NASSCOM growth
outlook of 11-14% YoY growth.
Valuation and Recommendation – BUY with Target Price Rs 350: NIIT
Tech is a unique IT services provider for TTL and Insurance sector (non-life)
with a 28-year heritage. NIIT Tech is best positioned in the niche IT space
to meet or exceed our above consensus forward estimates and grows
faster than peers. With a P/E multiple of 6.5x, is at steep discount
compared to the peer group, moreover with a predicted EPS growth CAGR
of 16%, the valuation looks compelling.

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