NIIT Technologies (NITEC.IN) - Healthy growth, driven by digital - Earnings Update

- In 2QFY18, NIIT Technologies’ revenue grew by 4.0% QoQ to INR 7,372mn led by RuleTek integration. Digital revenue witnessed a robust growth of 14% QoQ and accounts 23% of total revenue in 2QFY18.

- EBITDA grew by 7.5% QoQ to INR 1,191mn. EBITDA margins improved by 53bps QoQ to 16.2% led by operational efficiency. Net Income grew by 31% QoO to INR 671mn led lower tax rate in 2QFY18. PAT margin increased to 9.1% (+190 bps QoQ).

- Amongst geographies, RoW and America posted robust growth of 14.9%/6.1% QoQ respectively. Growth in America was driven by RuleTek integration. EMEA geography declined by 5.8% QoQ due to ramp down of a project in Transportation vertical. Amongst vertical, Manufacturing, Media & Others grew robustly by 11.7% QoQ followed by BFSI (+4% QoQ) led by Insurance, while Transport declined by 3.2% QoQ due to ramp down in a client. Amongst services, SI & PI grew at a healthy pace of 24.8% QoQ, followed by IP Assets, while BPO declined 16.8% QoQ. Revenue from top 5 and top 10 clients de-grew by 2.3%/0.6% QoQ respectively; however, top 6-10 clients grew by 4% QoQ.

Valuation: At CMP, the stock is currently trading at 14.4/12.5x of 18E/FY19E EPS. We rate the stock MARKETPERFORMER with target price of INR 634, valuing the stock at 13X FY19EPS. Risks: Challenging macroeconomic situation, a slowdown in IT spending and adverse cross currency movements.

Shares of NIIT TECHNOLOGIES LTD. was last trading in BSE at Rs.611.8 as compared to the previous close of Rs. 607.25. The total number of shares traded during the day was 21068 in over 1204 trades.

The stock hit an intraday high of Rs. 622.4 and intraday low of 608.6. The net turnover during the day was Rs. 12977679.

Source : Equity Bulls

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