NIIT Technologies - Strong order book and INR depreciation propel revenue growth - CSEC Research

- Revenues up 43% YoY at INR.4696mn and 5.9% on QoQ basis.

- Net Profit increased by 40% YoY to INR. 575mn & 24% on QoQ basis.

- EBIDTA margins were down 80 bps to 16%

- Net other income rose to INR 210 mn, as against INR 46 mn of losses in Q4 2012

- Cash & cash equivalents stood at INR.266.9mn, down from INR.2871mn in Q4 FY12

- Management expects revenue growth ahead of industry average

- Margins remain flat despite currency gains. Currency gains from depreciation of rupee (150 bps) were offset by annual compensation increases during the quarter (-235 bps), resulting in margins dropping by 80bps to 16% from 16.8%

Valuation:

At CMP stock trades at 7.5X and 6.8X to FY13 & 14 earning respectively. Higher margins coupled with healthy return ratios and a strong order book gives better revenue visibility. We assign a multiple of 8X FY14 EPS and rate NIIT Technologies a Buy with a target price of INR 346.

Risks: The macro upheaval could impact clients' IT budget thereby severely affecting our revenue growth assumptions. Adverse cross currency movements will also have an impact on the earnings.

Source : Equity Bulls

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