PINC Research recommends - Buy NIIT Tech; target of Rs 285

PINC Research is bullish on NIIT Technologies and has recommended buy rating on the stock with a target of Rs 285 in its May 6, 2011 research report.

“NIIT Technologies reported revenue growth of 9.2%QoQ to Rs 3,123 million led by strong volume growth of 7.8%QoQ (excl. hardware revenues). Onsite shift in revenue impacted margin, which was lower than expectation. Lower taxes (due to lower India revenue) led to in-line expected PAT. Robust growth in revenue, PAT and EPS in-line with estimates – Overall revenue grew 5%QoQ to Rs 3,157 million (PINCe Rs 3,078 million). EBITDA margin declined 20bpsQoQ to 20.5%, PAT stood at Rs 500 million (PINCe Rs 511 million), growth of 6.5%QoQ and EPS grew 4.9%QoQ to Rs 8.5 (PINCe Rs 8.6).”

“EMEA and US each grew 9.2%QoQ with each contributing 35% to the revenue. APAC and India with each 15% contribution to revenue grew 17%QoQ and 2.3%QoQ, respectively. BSF deal is almost over and next year we will see only small hardware revenues. Among verticals, Transport and Logistics grew 16%QoQ, BFSI grew 6.5%QoQ but Retail & Manufacturing declined 15.1%QoQ due to ramp down at a Japanese client. Top 5 clients grew 12.8%QoQ and top 20 clients grew 10.9%QoQ. During the quarter four new clients were added, of which one was from EMEA and three were from RoW. Utilisation rate declined marginally by 80bpsQoQ to 83.6%. Non-linear services grew 8%QoQ with 27% contribution to overall revenue. There was net addition of 448 employees taking the total headcount to 5,806.”

“Fresh order intake was USD116mn taking the order book executable over the next 12 months to USD169mn, which does not include any hardware revenues. We have downward revised our EBITDA margin expectations for FY12 but it is expected to improve in FY12 compared to FY11 due to absence of hardware revenues and improvement in non-linear revenues with increased traction in managed services. At CMP, NIIT Tech trades at 6.2x and 5.4x FY12E and FY13E earnings, respectively. We maintain ‘BUY’ recommendation on the stock with a revised target price of Rs 285 (Rs 300 earlier) based on 8xFY13E earnings,” says PINC Research report.(source: moneycontrol.com)

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