January 19, 2017 / 17:54 IST
EBITDA margin grew 70 bps to 16.9% and was above our 16.2% expectation mainly on account of higher revenues from offshoring. Going forward, the management expects to achieve its target of 17.5% EBITDA margins by Q4FY17E largely on account of better revenue growth and optimum utilisation. DSO days were at 69 vs. 90 in Q3FY16 leading to cash & cash equivalent to Rs 568 crore, up 82% YoY. Overall, we have built in EBITDA margins at 16.5% each in FY17E and FY18E.
Outlook
At the CMP, NTL is trading at a valuation of 9x FY18E EPS. However, our HOLD rating is obligated by subdued revenue growth in FY16-18E with stable margins. Consequently, we expect its rupee revenue, EBITDA to grow at a CAGR of 5.1%, 1.6%, respectively, in FY16-18E. We value NTL at 10x its FY18E EPS of Rs 45.6 to arrive at a target price of Rs 450.
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