Buy NIIT Technologies; target Rs 350: Dolat Capital
Dolat Capital is bullish on NIIT Technologies and has recommended buy rating on the stock with a target price of Rs 350 in its October 15, 2013 research report.
October 16, 2013 / 18:39 IST
Dolat Capital's report on NIIT Technologies
"We maintain our positive call on the stock post the earning call based on its sustained strong growth outlook, confidence on demand sustenance, possibility of margin recovery and economical valuations (6.5x PE and 0.6x Mcap/Sales, 3.5x EV/EBITDA). We maintain our BUY rating with a TP of Rs 350 valued at 8x of FY15E EPS of Rs 44.4.""Revenue in reported currency were up 8 percent QQ at Rs 5.8 bn from Rs 5.4 bn in Q1FY14 ahead of our expectations of Rs 5.7bn largely driven by Rs depreciation of about 10 percent in the quarter. Revenues in constant currency terms grew moderate at 0.3 percent QQ. The growth was soft largely due to ramp down in ROW geography on certain project completion. OPM improved by 66bps QQ at 12.4 percent inline as it booked losses on hedge portfolio at the topline. We expect OPM gains to extend in H2 given likely traction in overall volumes.""It booked new deal worth USD 84mn for the quarter with a total 12 month executable order position of USD 248mn. The deal addition was weak compared for its’ average of USD 110mn over last 8 quarters. It won three deals in Travel space one of its 10mn$+. Deal traction was skewed in terms of geographies with Europe surprisingly adding about $ 51mn deal wins for the quarter. US and ROW added just $16/$17mn respectively. It went live on its CCTNS projects at Jharkhand and Tamil Nadu Government.""EBIT grew by 15 percent (QQ) at Rs 731mn (EBIT margin up by 70bps QQ) at 12.4 percent. We believe the weak OPM performance (decline of about 500bps in last 10 quarter) despite strong revenue growth traction and supportive currency movement has been the single biggest reason for its economical valuation versus peers. We believe OPM would improve hereon by 200bps driven by improved volume and likely growth traction from developed market such as US/Europe."Valuation: "We remain positive on the stock in view of its sustained traction in fresh order intake and client additions supported by its niche capabilities in TTL and Insurance verticals. We maintain our positive view on the stock and have built in Revenue/PAT CAGR of 15 percent/13 percent over FY13-15E. We maintain our BUY rating on the stock with a Target Price of Rs 350, valued at 8x of its FY15E earnings," says Dolat Capital research report.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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