Prabhudas Lilladher's report on NIIT Technologies
NIIT Technologies (NIIT Tech) Q1FY16 performance was mixed-bag. Revenue was in-line, however margins were above expectation. The company reported order intake of $97m (+9.0% QoQ), with order executable up marginally by 1.7% QoQ to $300m. We expect strong performance to strengthen over FY16. Retain our ‘BUY’ rating.
NIIT Tech reported a revenue growth of 3.2% QoQ (@cc 5.0%,; Organic: 1.3%, 1.4% @cc) to US$101.2m (PLe: US$101.0m, Cons.: US$100.3m), and 4.9% QoQ in INR terms to Rs6,411m (PLe: Rs6,405m, Cons: Rs6,357m). EBITDA margins were flattish at 16.3% (PLe: 14.3%, Cons: 13.6%), despite wage hike as a result of increased international business and Incessant contribution. EPS (Adj.) grew by 36.9% QoQ to Rs9.6 (PLe: Rs7.5, Cons: Rs8.2), aided further by higher Other Income due to Forex gain.
Incessant provided much needed Digital (Experience) push to the revenue (overall: ~14% of revs). Organically, Digital revenue grew by ~20% QoQ (overall: 54% QoQ). NIIT Tech drives ~40% Digital Revenue from Digital Experience and ~50% of Digital revenue from Digital Integration (Incessant). Joint marketing team (NIIT Tech & Incessant) has bagged one deal during the quarter. Management sees strong cross selling opportunities for Digital Services to NIIT Tech clients.
"Management’s encouraging commentary for Travel & Transportation is shared by IATA also. Moreover, client specific issues in T&T are behind. For BFS, the optimism of Management was driven by Incessant’s acquisition; and Insurance growth is led by Room Solution. We expect 9% YoY revenue growth in USD term for FY16. Client specific issues are behind. We expect turnaround in FY16-17 in growth with margin expansion. We are factoring in improved revenue momentum in H1FY16 with margin uptick. Revise our TP to Rs 530 (Old Rs 480) as we tweak our model. Buy the stock", says Prabhudas Lilladher research report.
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