Accumulate NIIT Technologies; target of Rs 1400: Dolat Capital

Dolat Capital's research report on NIIT Technologies

NITEC reported muted Q4FY19 results, which were lower than our earnings estimate by 9.4%, due to a decline in the GIS business. This occurred despite Q4 being seasonally strong quarter for GIS. The company signed two large deals in the quarter and is confident of the deal momentum in the future. We believe with a healthy deal inflow and digital capabilities, NITEC will sustain revenue growth QoQ and is likely to report USD revenue growth of 14%/11% in FY20E/FY21E, respectively. Despite divestment of the GIS business, which was initiated in Q4FY19, NITEC maintained the aspirational EBITDA margin of 18% for FY20.

Outlook

The stock is trading at fair valuation of 15.7x/13.6x FY20E/FY21E, leaving limited absolute upside from the current level. Hence, we downgrade NITEC to ACCUMULATE (BUY earlier), with a revised TP of ` 1,400, based on 15x rolling one-year fwd. PER.

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