Buy NIIT Technologies; target of Rs 2190: Prabhudas Lilladher

Prabhudas Lilladher's research report on NIIT Technologies

NIIT Tech Q1FY21 performance was tepid as revenue de-grew 9.6% QoQ (CC: 6.8% QoQ) below ours/cons estimates of -6% USD/5% CC QoQ. EBIT at 11.6% (Ple: 12.5%/ cons: 12.2%), down 230 bps QoQ, impacted by write-off, RSU charges, and weak revenue performance. But, NIIT Tech’s commentary has been strongest among peers for FY21 despite one of the weakest starts. Guidance of mid-single digit growth for FY21 and ~7% QoQ cc growth for next quarter. Management has guided EBITDA margin of ~17.8% in FY21. Strong momentum of 13th consecutive quarter of improving deal win in Q1FY21. Deal wins at USD 186 mn (order intake: +6.3% YoY, executable: +17.7% YoY). NIIT Tech is well-placed to tap the growing needs of the clients in the Digital segment through its acquisition of Incessant, which is growing its revenues in excess of ~16% with margins of >~22%.

Outlook

NIIT Tech owns many IPs in the insurance and travel verticals. Management team has been revamped completely over the last three years. We see stability of senior leadership as one of the key reasons for the resilient performance.

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