Result Update: NIIT Technologies Ltd (NIITT) - ACCUMULATE - TP Rs.518 - Kotak

NIITT reported strong growth of 3.4% sequentially (ex Settlement amount) beating our estimates of 08% growth. Margins were in line with our estimates at 17.6% (ex settlement amount), an expansion of 90bps QoQ. Key positive was the healthy order intake of USD112mn (6th consecutive quarter of intake over USD100mn), with 12 month executable order book at USD 320mn. US business reported good growth on the back of expansion in key accounts due to increased traction of Incessant. GIS business also reported strong growth. NIITT has won 17 out of 18 smart city projects. With healthy order intake and positive discussion for FY18, growth is set to accelerate in FY18, with Q1FY18 expected to break the usual Q1 weakness momentum. We expect USD revenue growth of 8.8% and 9% for FY18 & FY19 respectively. Digital revenues increased to 21% of revenues during the quarter, growing by 14% sequentially. NIITT announced a dividend of Rs.12.5 for FY17 and hopes to maintain a similar payout of 35% in future too. Our FY18 & FY19 earnings stand at Rs.46.9 (Rs.48.2) & Rs.54.6 per share respectively. Valuation at 10x/8.6x FY18/19 P/E are relatively inexpensive (with cash accounting for 25% of market cap). However, we downgrade the stock to ACCUMULATE from BUY earlier due to recent run-up in stock price. Our target price of Rs.518 (Rs.482 earlier) will discount FY19 earning by 9.5x. We will watch out for consistency in revenue growth before according higher valuations. The company will have net cash of about Rs.126 per share by FY18 end, as per our estimates.

Shares of NIIT TECHNOLOGIES LTD. was last trading in BSE at Rs.510.65 as compared to the previous close of Rs. 527. The total number of shares traded during the day was 39622 in over 1640 trades.

The stock hit an intraday high of Rs. 531.85 and intraday low of 508. The net turnover during the day was Rs. 20531679.

Source : Equity Bulls

Keywords