Accumulate NIIT Technologies; target of Rs 450: Emkay

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26 Aug, 2025 12:21

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Emkay's research report on NIIT Technologies

"NIIT Tech has reported revenues at Rs. 5,873 mn flat QoQ and a tad lower than expectations (however note that this is on account of lower hardware revenues at Rs 237 mn V/s Rs 470 mn in Sep'13 quarter). Services revenues grew at 3.6 percent QoQ V/s 2.8 percent QOQ last quarter. EBITDA margins had improved by ~120 bps sequentially to 16.3 percent and mark the second quarter of improvement in financial performance aided by lower contribution from Hardware revenues. Profits at Rs 531 mn (-14.9 percent QoQ) were lower than our estimates primarily on account of forex losses (translation losses). Growth was led by US and ramp up in a large deal from an existing US financial services clients. DSO declined to 96 days V/s 100 days QoQ and after continuous increase in debtor days through recent quarters. Overall Headcount at 8,160 was up ~140 people QoQ. Fresh order intake at USD 377 mn was the highest ever in NIIT Tech’s history and includes a renewal of USD 300 mn10 yr contract from an existing BFSI client (with ~USD 30 mn of incremental business).

Street (Including us) have been concerned about the continuous increase in India/Govt business through recent quarters which impacted margins adversely as well as led to increased working capital/higher debtor days. NIIT Tech is on a course correction ahead with the revamped management focusing on (1) increasing relevance on the international geographies (and thereby lesser focus on India business ahead) and (2) hence improving margins ahead (note that NIIT Tech’s margins have improved for 2 quarters in a row after declining by ~300 bps+ over FY11-13).

While our FY14E earnings are lowered by ~4 percent to account for Dec’13 miss, FY15E earnings stand increased by ~5 percent largely on account of higher margin assumptions ahead(refer table below). Inexpensive valuations at ~8.6x/8x FY15/16 P/E (~20 percent discount to average P/E of other mid tier peers) and given upside risks to earnings from an improving operational performance make us back further stock upsides despite a 30 percent upmove over the past 3 months. Accumulate, target price (TP) upped to Rs 450 (based on 9x FY16 P/E)," says Emkay Global Financial Services research.

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