Buy NIIT; target of Rs 67: Unicon Investment

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Buy NIIT; target of Rs 67: Unicon Investment

Unicon Investment is bullish on NIIT and has recommended buy rating on the stock with a target price of Rs 67 in its July 27, 2011 research report.

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Unicon Investment is bullish on NIIT and has recommended buy rating on the stock with a target price of Rs 67 in its July 27, 2011 research report.

"NIIT has reported revenue of INR 3,212 mn, up 15% (YoY) but down 1% (QoQ). Revenue was slightly below our estimates. Revenue growth was largely aided by strong volume growth. Placements made by the company during the quarter were up 28% while career enrolments were up 16% on a YoY basis. On a segmental basis, Corporate Learning Solutions saw a strong 21% YoY growth while Individual Learning Solutions grew a robust 16% YoY."

"EBITDA for the quarter stood at INR 307 mn, up 6% (YoY) but down 24% (QoQ). This was below our estimates. EBITDA margin at 9.6% dropped 87 bps and 295 bps on an annual and quarterly basis respectively. Margin compression was seen in Q1 largely due to the impact of wage hikes and increased investments in Cloud Campus of GNIIT and NIIT One World learning platforms. Net Profit in Q1 stood at INR 131 mn, significantly below our estimates. Net Profit was down marginally by 2% YoY but a whopping 65% on a QoQ basis. Margin compression during the quarter kept NIIT's bottom line under pressure. The total order book of the company is currently INR 10.27 bn. Out of this, nearly half or INR 4.85 bn will be executable in the next twelve months. The total staff strength at NIIT stood at 4,434 comprising 985 sales staff, 854 indirect and 2,595 direct tutors."

"The management expects its investments in the Cloud Campus and One World learning platforms to improve margins going forward. Its focus will be mostly on the high margin non-government school market. With strong hiring across industries in India and the gradual recovery in training budgets in US companies, we believe the company can meet its earnings expectations. We maintain our BUY rating on this stock with a price target of INR 67, implying an upside of 20%," says Unicon Investment research report.

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To read the full report click on the attachment