Multi Bagger - NIIT Technologies Ltd.

[UAE Exchange Etrade]

NSE ID : NIITTECH

CMP - Rs.260/-

NIIT Technologies is a leading IT solutions organisation with over 7000 professionals serving customers in North America, Europe, Middle East, Asia and Australia.

The company posted decent numbers for the quarter ending December 2012. The Sales for the quarter ended December 2012 of Rs.514.40 crores rose by 18.80% from Rs.433 crores y-o-y. Operating profit surged by just 4.1% at Rs.81.20 crores as against Rs.78 crores in the like period last year whereas there was a marginal decline by about 4.25% on q-o-q. The company has witnessed lower sequential operating margin due to slowdown in GIS, NITL and transition of new project in Morris. A sharp net profit growth of about 30% at Rs.56 crores was reported for the quarter ended December 2012 compared to Rs.43.10 crores of preceding quarter ended September 2012. There is a sequential increase in other income due to gain on revaluation of current assets and liabilities resulting in higher net profit margins. EPS for the quarter stood at Rs.9.31.

The company incurred a capex of Rs.18 crores during the quarter. BFSI contributed 31%(down by 5.1% qoq) to the revenues; Transportation added 42%( up by 1.8% qoq); Manufacturing & Distribution contributed 6%( up by 4.9% qoq) and Government contributed 8%(up by 56.2% qoq).

The company has witnessed strong growth in domestic business, EMEA & US whereas there was a decline in APAC due to projects going live.

Valuation

With consistent order intake; upbeat guidance and penetration into Tier 2 financial institutions, NIIT Technologies' revenue visibility looks positive. We believe NIIT Technologies Ltd. is trading at an attractive valuation at 7x and 5.99x of FY13EPS of Rs.36.79 and FY14EPS of Rs 42.97. We initiate a 'BUY' on the stock with a target price of Rs 330 (appreciation of about 28%) with the medium to long term investment horizon.