NIIT Tech to announce Q3 results on Jan 18; here are key issues to watch for

NIIT | Nippon Life India Trustee through various schemes of Nippon India Mutual Fund raised stake in company to 7.38 percent from 6.55 percent earlier.

IT services company, NIIT Technologies is likely to post US dollar revenue growth of 2-3 percent in Q3, according to brokerages. The constant currency revenue growth is likely to be in the range of 3-4 percent.

The company is scheduled to announce its December quarter earnings report on January 18.

Motilal Oswal said it expects growth momentum from last quarter to continue in 3QFY19 on account of sustainable deal flow and large deal velocity. However, it added furloughs and holidays could partially offset the momentum sequentially.

It expects NIIT Technologies to post revenue growth of 4 percent QoQ on constant currency terms. But the brokerage said currency headwinds could dent revenue in US dollar terms.

“With the new normal on margins set in the previous quarter, we expect EBITDA margin to expand 30bp QoQ to 18.3 percent on account of higher operational efficiency. Our PAT estimate is Rs 110 crore, a 1.3 percent decline QoQ, primarily led by strength in the operating performance,” it said in a research note.

The mid-cap IT company had posted INR revenue of Rs 907 crore in Q2FY19, a 23 percent YoY growth. The profit of the company stood at Rs 111.3 crore in the second quarter, registering a strong growth of 30 percent QoQ and 67 percent YoY.

Centrum Broking expects the company’s US dollar revenues to grow 2.5 percent QoQ and constant currency growth to be at 3 percent QoQ. That implies, the brokerage firm also expects a cross-currency headwind of 50 bps QoQ.

“We expect EBIDTA margins to remain flat QoQ led by currency tailwinds,” it added in its note.

Prabhudas Liladher pegs company's constant currency revenue growth at 3.3 percent and expects US dollar revenue to grow 3 percent in the quarter.

“Cross currency would be a headwind of 50bps QoQ. We expect EBIDTA margins to remain flat QoQ with tailwinds from currency depreciation negated by headwinds from furloughs in the quarter,” Prabhudas Liladher said in a note.

Key issues to watch for (by Motilal Oswal)

-Traction in digital and the international business

-Progress on development of strategy under new leadership

-Deal wins and outlook for the year