Accumulate NIIT Technologies; target of Rs 1185: Kotak Securities

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26 Aug, 2025 12:21

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NIIT Tech reported revenue growth of ~2% in dollar terms, ahead of our estimates. EBITDA margins at 15.8% was in line with our estimates. Margins during the quarter were impacted by wage hikes, visa costs and seasonal decline in GIS business. PAT increased by 67.4% YoY to Rs.858mn. Management has guided for a strong FY19 and expects organic CC revenue growth to be in at least double digit. Also, margins are expected to expand further aided by strong deal momentum(higher digital wins) and process changes. NIIT Tech continues to win USD100mn + deal during the quarter with 12 month executable order rising to USD 347mn from USD 339mn in previous quarter. Fresh order intake rose by ~37% YoY to USD151mn whereas the rise in executable order was up by ~8%. The difference between order intake and executable order is largely due to higher proportion of digital wins which are of shorter cycle with higher margins.Company won three USD 10mn + deals during the quarter against the Tier I vendors.

We have upgraded our revenue estimate for FY19/FY20E given the strong execution and healthy order intake, and believe the changes made in strengthening of its leadership and sales team would further boost the deal momentum in FY19. We expect USD revenues to grow at CAGR of 12.6% over FY18-20. We expect margins to improve further over FY19/20.  With continues outperformance, optimistic outlook and companies capabilities to match well performing peers we ascribe a higher multiple of 17x v/s 16x previously. We maintain ACCUMULATE with a revised target price of Rs.1185 (Rs.1082 earlier).

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