Accumulate NIIT Technologies; target of Rs 1445: Prabhudas Lilladher

Prabhudas Lilladher's research report on NIIT Technologies

NIIT Tech delivered a strong revenue growth of 4% QoQ in cc terms (excl. GIS business impact) Whishworks acquisition contributed +1.2% to the revenue (15days impact). EBITDA Margin came in at 14.4% eroded by 313bps QoQ and 142bps YoY. However, Adj. EBITDA margin stood at 17.1%. We expect revenue trajectory in FY20E to be strong & expect revenues to grow by 12% in FY20E on back of strong deal pipeline. NIIT Tech order intake has improved this quarter also with two large deals & 11 new logos added, strong deal closure at USD175mn in Q1FY20. Deals are getting bigger & better every quarter. NIIT Tech has seen strong build-up in deal wins over FY19. Management also showed confidence on growth momentum across the verticals, but management gave cautious outlook on US capital markets. Strong order wins coupled with healthy order pipeline gives us confidence on visibility of revenue growth momentum in FY20E(mid-teens).

Outlook

We downgrade NIIT Tech from Buy to Accumulate on account of management transition, macro uncertainty & expensive multiples limit the upside potential. We expect USD revenue CAGR of 14.1% and EPS CAGR of 17.1% over FY19-21E. Our new TP stands at Rs. 1445 valued at 16X FY21E(earlier 17X) earnings multiple & stock trades at 17.9x/ 15x FY20E/21E EPS of Rs 76/90.

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