MOSL: NIIT TECHNOLOGIES (Neutral)-Above-estimate excluding one-offs-Outlook for BFSI-led acceleration in FY18 growth

​NIIT Technologies: Above-estimate excluding one-offs; Outlook for BFSI-led acceleration in FY18 growth

(NITEC IN, Mkt Cap USD0.5b, CMP INR471, TP INR470, 0.2% Downside, Neutral)

• BFS traction compounds GIS seasonality: NIIT Technologies' (NITEC) 4QFY17 revenues (excl. one-time settlement gains) grew 3.4% QoQ (+4.6% YoY) to INR7.16b, above our estimate of INR6.98b. EBITDA grew by 1.8% YoY to INR1.28b and PATF by 2.5% YoY to INR810m (excl. one-offs). ~4% QoQ growth in BFSI helped drive revenue beat for the quarter. For full-year FY17, revenues grew by 4% YoY to INR27.7b, EBITDA by 2.3% YoY to INR4.7b, while PAT declined by 0.7% YoY to INR2.62b.
  
• Profit beat on better margins, lower tax: EBITDA margin expanded 100bp QoQ to 17.9%, above our estimate of 17.5%. PAT excluding one-offs grew 12.5% QoQ to INR810m, well above our estimate of INR667m, as operating beat was compounded by a lower tax rate of 16% (est. of 24%).
  
• Outlook for growth acceleration and margin expansion in FY18: NITEC expects revenue growth in FY18 to be higher than FY17, led by: [1] broad-based traction in BFSI, [2] opportunity in GIS from Smart Cities and [3] continued momentum in Digital. Also, SGA efficiencies and a number of ongoing programs, combined with soft wage hikes, should help drive margin expansion (from 16.6% in FY17) despite a stronger INR.