Accumulate NIIT Technologies; target of Rs 530: Emkay

Emkay's research report on NIIT Technologies

We upgrade NIIT Tech to ACCUMULATE (V/s HOLD earlier) with a revised TP of Rs 530 (based on 12x 1 year forward P/E, V/s Rs 400 earlier) enthused by June’15 quarter beat and our expectations of improving financial performance continuing

June’15 quarter results beat was driven by strong performance in International Business(+8.6% QoQ in reported terms, +4.4% QoQ on an organic basis) with margins remaining flat sequentially despite headwinds from wage hikes, strong hiring aided by growth leverage and consolidation of margin accretive Incessant acquisition

While order intake run rate remains similar to historical trends, management expects growth in International geographies to remain strong led by new logo additions( added 2 new clients in Travel vertical and expects to sign up 2 more during Sep’15 quarter) and traction in the Incessant business

"Raise FY16/17E EPS by 13/10% each to Rs 38/43 respectively driven by June’15 quarter beat and raise in revenue/margin assumptions. NIIT Tech has started showing results on each of the agendas undertaken over the recent quarters and a sustainable and predictable performance over the next few quarters should drive valuation re-rating given significant discount to mid-tier peers", says Emkay Global Financial Services research report.

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