Accumulate NIIT Technologies - Q3FY14 Results - Kotak

NIITT's operational results were above estimates. The 3.6% CC revenue growth in services was better than what we had expected. The contribution from BFSI and US geography increased, which is a positive as these are high potential areas. Travel & transportation (T&T) vertical grew by 2% QoQ and the BFSI grew by 8.5% (largely BFS), which is encouraging. Margins improved due to lower contribution from bought-out revenues (hardware) and higher revenues from services. The management (under Mr. Sudhir Chaturvedi) is now focusing more on the high growth and high margin businesses, which should bode well for the future.

The company has won a 10-year $300mn renewal deal from one of its large clients, which is encouraging and provides comfort on the company's market positioning as far as large deals are concerned. Expected improvement in profitability of GIS / Morris and improved growth projections by IATA bode well for the prospects of NIITT.

Our FY14E and FY15E EPS stand at Rs.38.1 (Rs.38.9) and Rs.45.7 (Rs.41.8), respectively. We assume the rupee to average 60 / USD in FY15. Our DCF - based price target stands at Rs.410 (Rs.326) on improved medium-term growth prospects and margins. The stock has moved up fast over the past few weeks. We recommend ACCUMULATE (BUY). The company will have net cash of about Rs.76 per share by FY15 end, as per our estimates.

Source : Equity Bulls

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