Buy NIIT Tech; target of Rs 340: Emkay

Emkay Global Financial Services is bullish on NIIT Technologies and has recommended buy rating on the stock with a target of Rs 340 in its July 19, 2012 research report.

“NIIT Tech reported revenues at Rs 4.7 bn (+5.9% QoQ), in line with estimates however margins at 16% , down ~80 bps QoQ missed expectations impacted adversely primarily by wage increments. Profits at Rs 576 mn (+25% QoQ) beat estimates essentially aided by forex gains despite higher than expected tax rates at 29.8%. Headcount addition was a tad somber after strong additions in the recent qtrs with co adding only ~82 people in the current qtr. Order wins during the qtr were flat QoQ at US$ 80 mn with order book executable over 12 months also remaining flat sequentially at US$ 240 mn.”

“NIIT Tech remains confident of growth from the Travel Segment (40% of revenues in June’12 qtr, grew by 60%+ in FY12) driven by recent wins from the segment, however is seeing some delays within both European and US financial services clients. That said, NIIT Tech has benefited from a vendor consolidation exercise at an existing Financial Services client wherein NIIT Tech was able to displace a Tier I competition which should help growth from the segment through FY13 and FY14.”

“While we moderate our US$ revenue estimates and now build in a 14% US$ revenue growth for FY13 (note that NIIT Tech’s US$ revenue est get impacted adversely much higher than peers because of higher non US$ currency exposure), our FY13/14E earnings are tweaked lower by 4%/0.7% each to Rs 37.5/41 respectively. We continue to retain ACCUMULATE on NIIT Tech with an unchanged TP of Rs 340 on inexpensive valuations at ~7.6x/7x FY13/14E P/E for 20%+ ROE’s and ~3% dividend yield,” says Emkay Global Financial Services research report.  

Institutional holding more than 40% in Indian cos

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