Buy NIIT Technologies; target of Rs 2200: ICICI Direct

ICICI Direct's research report on NIIT Technologies

NIIT Technologies (NIITT) reported 9.4% QoQ decline in revenues mainly due to a sharp fall in travel vertical, specifically airlines that declined from 13% of revenues in Q4FY20 to 5.0% in Q1FY21. Margins fell 173 bps mainly due to ESOP cost (113 bps) and lower gross margins due to higher hardware cost & lower utilisation in travel vertical. The company has guided a 7.0% QoQ increase in revenues in Q2FY21E and 150 bps increase in margins in Q2FY21E. Further, NIITT has guided revenue growth of mid-single digit in FY21E and 17.8% EBITDA margin in FY21E before ESOP cost.

Outlook

Further, improvement in airlines (that we have not factored in our estimates) could also be a tailwind to revenues, profitability. Hence, we upgrade the stock from HOLD to BUY with a revised TP of Rs 2,200.