Accumulate NIIT Technologies; target of Rs 1551: Prabhudas Lilladher

Prabhudas Lilladher's research report on NIIT Technologies

NIIT Tech delivered a strong revenue growth of 7.7% QoQ (4.1% organic cc) to USD 148.7mn (Ple: USD145.4mn, Cons: USD 146mn). EBIT margin expanded 350 bps QoQ to 17.1% (Ple: 15.5%, Cons: 13.4%) aided by visa seasonality, INR depreciation and no one-time M&A expense. Q2FY20 was tenth consecutive quarter of improvement in deal closure. Management mentioned one of its top 5 client is in the process of budget cut due to financial pressure, however NITEC has managed to maintain its wallet share. NIIT Tech reported deal win of USD176mn highest ever with 10 new clients (7 in US, 1 in EMEA and 2 in ROW). & orders executable in one year increased to USD 405 mn, the highest ever. Deals are getting bigger & better every quarter. Management also showed confidence on growth momentum across the verticals, but management gave cautious outlook on US capital markets & suggested seasonal moderation in revenue growth in Q3FY20E quarter on account of lower billing days though sees no unusual weakness/possibility of extended furloughs. Strong order wins coupled with healthy order pipeline gives us confidence on visibility of revenue growth momentum in FY20E(mid-teens).

Outlook

We fine tune our estimates & introduce FY22E estimates valuing NIIT Tech on Sep-21 EPS of Rs. 97 at 16x multiple to arrive at a changed target price of Rs. 1551 (earlier Rs.1445). NIIT Tech is currently trading at 16x/14.4x FY21E/22E multiple.

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