Maintain Buy on NIIT Technologies - PINC Result Review

NIIT Tech beat our expectation on the topline by 7.6% and recorded strong Q2 numbers on higher volume growth and a larger component of bought out revenue. IT services recorded robust volume growth of 7% QoQ.

* Robust revenue growth, enhanced profitability
* Broad based growth across verticals and geographies
* Strong new order intake of USD60mn, top clients outperform.

Outlook – High revenues on the back of BSF contract, improved margins led by non linear initiatives

The BSF contract has boosted the revenue growth for NIIT Tech and we expect a 32%YoY growth for FY11. We expect increased volumes from EMEA to lead to higher growth in FY11 and FY12. Improved margins from Room Solutions focus on non linear initiatives, higher offshoring and utilization would support the EBIDTA margin. We believe that broad based growth and NIIT Tech's niche offering would lead to strong profitability.

NIIT Tech trades at 7.4xFY12 earnings. We maintain 'BUY' with a target price of Rs278 based on 9xFY12 earnings.

Source : Equity Bulls

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