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B a b y s t e p s i n t h e r i g h t d i r e c t i o n …
NIIT reported its Q3FY12 revenues and PAT ahead of our estimates but
EBITDA margins were below. Revenues declined 16.8% YoY to | 250.1
crore ahead of our | 228.7 crore estimate while EBITDA margins of 10%
were below our 15.8% estimate. The net income beat (| 40.7 crore
reported vs. our | 19.6 crore estimate) was aided by other income gains
of | 165.2 crore. During the quarter, NIIT repaid | 287-crore debt aided by
divestiture of the Element K business. As a reminder, NIIT sold the
Element K business for $110 million and received pre-tax proceeds of
$96.4 million adjusted for transaction expenses. Tax liability from this
transaction would be $23.9 million. Break-up of this includes $20 million
tax payable in the US and $3.9 million as the withholding tax, which has
been paid. NIIT’s balance sheet now carries ~| 110 crore of non
convertible debentures (NCD) due for maturity since April 2012 and
spread over three years. We are raising our FY13E EPS estimate as net of
tax interest cost could be lower by | 1.3/share. Though NIIT’s baby steps
are in the right direction, we are maintaining our HOLD rating as refilling
of lost growth stays crucial.
ƒ Operating metric highlights
Revenues from the individual learning solutions (ILS) business grew
11% YoY to | 132.7 crore with EBITDA margins of 13% vs. 17% in
Q3FY11. The ILS pending order book stands at | 177.4 crore with
65% of it executable over the next 12 months. The school learning
solutions (SLS) business grew 1% YoY to | 36.8 crore with EBITDA
margins of 3.5% vs. 13% in Q3FY11. SLS fresh order intake was |
20.4 crore taking the order backlog executable over 12 months to |
136.6 crore. Corporate learning solutions (CLS) declined by 44.3%
YoY to | 80.5 crore with EBITDA margins of 10% vs. 8% in Q3FY11.
CLS order intake was $21.2 million taking the pending order book to
$ 47.6 million with 50% of it executable in the next 12 months.
V a l u a t i o n
We expect revenues, EBITDA & earnings to grow at a modest 3.6%, 6.8%
and 22.2% CAGR during FY10-FY13E, respectively. We continue to value
NIIT on an SOTP basis with an overall EV/EBITDA target multiple of 2.2x
on our FY13E EBITDA i.e. with a target price of | 46 and maintain our
HOLD rating as refilling of lost growth stays crucial
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
B a b y s t e p s i n t h e r i g h t d i r e c t i o n …
NIIT reported its Q3FY12 revenues and PAT ahead of our estimates but
EBITDA margins were below. Revenues declined 16.8% YoY to | 250.1
crore ahead of our | 228.7 crore estimate while EBITDA margins of 10%
were below our 15.8% estimate. The net income beat (| 40.7 crore
reported vs. our | 19.6 crore estimate) was aided by other income gains
of | 165.2 crore. During the quarter, NIIT repaid | 287-crore debt aided by
divestiture of the Element K business. As a reminder, NIIT sold the
Element K business for $110 million and received pre-tax proceeds of
$96.4 million adjusted for transaction expenses. Tax liability from this
transaction would be $23.9 million. Break-up of this includes $20 million
tax payable in the US and $3.9 million as the withholding tax, which has
been paid. NIIT’s balance sheet now carries ~| 110 crore of non
convertible debentures (NCD) due for maturity since April 2012 and
spread over three years. We are raising our FY13E EPS estimate as net of
tax interest cost could be lower by | 1.3/share. Though NIIT’s baby steps
are in the right direction, we are maintaining our HOLD rating as refilling
of lost growth stays crucial.
ƒ Operating metric highlights
Revenues from the individual learning solutions (ILS) business grew
11% YoY to | 132.7 crore with EBITDA margins of 13% vs. 17% in
Q3FY11. The ILS pending order book stands at | 177.4 crore with
65% of it executable over the next 12 months. The school learning
solutions (SLS) business grew 1% YoY to | 36.8 crore with EBITDA
margins of 3.5% vs. 13% in Q3FY11. SLS fresh order intake was |
20.4 crore taking the order backlog executable over 12 months to |
136.6 crore. Corporate learning solutions (CLS) declined by 44.3%
YoY to | 80.5 crore with EBITDA margins of 10% vs. 8% in Q3FY11.
CLS order intake was $21.2 million taking the pending order book to
$ 47.6 million with 50% of it executable in the next 12 months.
V a l u a t i o n
We expect revenues, EBITDA & earnings to grow at a modest 3.6%, 6.8%
and 22.2% CAGR during FY10-FY13E, respectively. We continue to value
NIIT on an SOTP basis with an overall EV/EBITDA target multiple of 2.2x
on our FY13E EBITDA i.e. with a target price of | 46 and maintain our
HOLD rating as refilling of lost growth stays crucial
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