October 21, 2016 / 18:05 IST
NITEC reported USD revenue growth of 1.4%QoQ. EBIT margin improved 168bps QoQ to 11.9% due to lower SG&A expenses (18.8% of sales against 19.9% in Q1). The management has guided for lower revenue growth in UK insurance due to Brexit impact. We pare our FY18/FY19 earnings estimates and believe NITEC would command a relatively lower PE multiple vs peers in the midcap IT space on the back of weak growth prospects. We maintain our ACCUMULATE rating & roll-over to a Sep’17 target price of ` 475 (` 520 earlier).
The management expects Q3FY17 to be relatively weak in terms of revenue growth and has guided for exit EBITDA of 17.5% in FY17. We believe lower revenue growth due to weakness in the insurance vertical in UK will impact earnings going ahead. We pare our earnings estimate by 10.2%/9% for FY18/FY19 on account of weak growth and margin. Maintain ACCUMULATE with a Sep’17 TP of Rs 475 (earlier Rs 520) based on 10x one yr. fwd. PER.
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