Buy NIIT Technologies; target of Rs 340: P Lilladher
Brokerage house Prabhudas Lilladher is bullish on NIIT Technologies and has recommended 'Buy' rating on the stock with a price target of Rs 340 in its research report dated July 16, 2013.
July 17, 2013 / 16:50 IST
Prabhudas Lilladher's report on NIIT Technologies
NIIT Technologies reported a flattish revenue growth of 0.9 percent (0 percent @cc) QoQ to Rs5,419m (PLe: Rs5,453m, Cons: Rs5,562m). EBITDA margins dipped by 202bps to 14.4 percent (PLe: 14.9 percent, Cons: 14.9 percent), primarily due to a wage hike effective from April 2013. However, PAT de-grew by 5.8 percent QoQ to Rs532m (PLe: Rs605m) due to higher ETR (dividend tax paid for repatriation of dividend from overseas subsidiaries).Order book has grown by 32 percent QoQ to USUSD 145m. The order book was largely led by US (4.8 percent QoQ) and RoW (97.4 percent QoQ). Moreover, the company is chasing 4-5 large deals, of which, three deals are from new customers (Size: USD 10-15m) and two from existing customers (Size: USD 20m+). Sales cycle for these deals is 3-9 months.The management has already accounted for a wage hike in Q1FY14. The contracts renewed are either at same realization or up by 4-8 percent. Moreover, the hardware pass-through revenue will decline steadily. Also, Morris contract is transformed to outcome-based model.Revenue performance of the company has bottomed out, so has margins. We believe that revenue momentum will pick-up from H2FY14. However, currency is going to provide support to the margin in Q2FY14 with further expansion in H2FY14 as the revenue picks up.Valuation & Recommendation: "Positive IATA commentary, ramp-up in government projects and stability in GIS would give revenue growth with stable margin. It is currently trading at 6.8x FY14E earnings estimates with an EPS CAGR of 11 percent (FY13-15E). Buy the stock with a target price of Rs 340," says Prabhudas Lilladher 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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