Motilal Oswal neutral on NIIT Technologies

Motilal Oswal has maintained neutral rating on NIIT Technologies with a target of Rs 320 in its October 17, 2012 research report.

“NIIT Technologies (NITEC) posted revenue of INR5b (v/s our estimate of INR5.11b) and EBITDA margin of 17% (v/s our estimate of 18.6%) for 2QFY13. The underperformance was driven by sluggishness in higher-margin segments – ROOM solutions and GIS (140bp headwind to margins). PAT at INR431m too was significantly below our estimate of INR612m, most of which is explained by forex losses of INR151m.”

“The company flagged off possibility of pricing declines going forward, driven largely by stress in BFSI. However, upward revision in air traffic forecast for both 2012 and 2013 along with healthy state of NITEC’s travel domain clients bodes well for the company. While performance on order bookings remained impressive (USD93m bookings including incremental orders of USD20m from Morris), we remain concerned on margins going forward, with headwinds from: [1] possible cuts in pricing, [2] expectation of sluggishness for couple of quarters in high margin ROOM solutions segment, and [3] transition costs at onsite in new deal with Morris.”

“We have cut our FY13E EPS by 11%, factoring in: [1] forex losses in 2QFY13, [2] lower-than-estimated margins in 2QFY13, and [3] assumed currency rate of INR53/USD in 2HFY13 v/s INR54/USD earlier. Our FY14 estimates are largely unchanged. While we take comfort in a healthy order book that aids revenue visibility in a tough environment, improvement in revenue quality, which would be reflected in sustained higher OPM, is key to our view on the stock. Maintain neutral,” says Motilal Oswal research report.

Non-Institutions holding more than 90% in Indian cos 

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More