ICICI Direct's research report on NIIT Technologies
NIIT Tech reported soft Q3FY16 quarterly earnings as revenue growth was below estimates while margins were ahead
US$ revenues declined 1.3% QoQ to $103.4 million, below our $106.6 million and 1.8% growth estimateAt 18.2%, EBITDA margins improved 60 bps QoQ, above our 40 bps QoQ improvement and 18% estimate led by improvement in SG&A
Reported profit of Rs 74.2 crore was in line with our Rs 72.5 crore estimate
Raising earnings but maintaining target price…We expect NTL to report revenue, adjusted PAT CAGR of 12.5%, 26% in FY15-17E (average 17.8% EBITDA margins in FY16-17E, 17% earlier), vs. 21%, 9% reported in FY10-15 (average 17.2%), respectively. Though restructuring of sales function and execution efforts under the COO has led to growth acceleration and improved margin trajectory, we retain our HOLD rating as execution continues to be lopsided and bookings that continue to be uneven. Together, this could lead to moderation in growth in FY17E. We value NTL at 10.5x its FY17E EPS of Rs 50 to arrive at our target price of Rs 525.
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