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MOSL: NIIT TECHNOLOGIES (Neutral)-Strong exit and equally robust outlook-Upgrading estimates by 5-8%

NIIT TECHNOLOGIES: Strong exit and equally robust outlook; Upgrading estimates by 5-8%

(NITEC IN, Mkt Cap USD1.0b, CMP INR1028, TP INR1000, 3% Downside, Neutral)

  •  Ends the year on a strong note…: 4Q CC revenue growth was 4.3% v/s our estimate of 2.5%. EBITDA margin at 18% (+90bp QoQ) was in line. 4QFY18 revenue grew 17.3% YoY (est. of +14.1%) to USD122m, EBITDA rose 12.5% YoY to INR1,418m and PAT increased 16.5% YoY (est. of +10%) to INR861m. For FY18, NITEC's INR revenue grew 7.8% YoY, while CC revenue rose 9.7%. EBITDA grew by 9.4% YoY to INR5.0b and PAT by 25% YoY to INR2.8b. Adjusted for one-time exceptional loss in FY17, PAT growth was 11% YoY.
  • …and guides for a robust FY19 led by better client budgets: NITEC expects FY19 organic CC revenue to grow at least in double digits. Also, margin is guided to expand further from 16.8% in FY18. NITEC cited that the budget outlays of its top-20 clients are much better than previous years, and the outlook for robust growth is premised on a broad-based traction in spending. That is also reflected in its expectation of more large deals than the seven signed this quarter
  • Valuation view: We upgrade FY19/20E revenue by 1.4/1.8%. Also, given the commentary of margin expansion, our FY19/20 earnings estimates are up by 5%/8%. We now expect a CAGR (FY18-20) of 12% in USD revenue and 20% in earnings. Our TP of INR1,000 discounts forward earnings by 15x (3% downside). NITEC is entering into double-digit organic growth trajectory after a while, and we would ascribe a higher multiple as confidence grows on sustenance of such traction. Maintain Neutral.
Underlying
Coforge

NIIT Technologies Ltd is an India-based Information technology (IT) solutions company. The Company is engaged in application development and maintenance, managed services, cloud computing and business process outsourcing to organizations in several sectors such as banking and financial services, insurance, travel and transportation and logistics, manufacturing and distribution and government. The Company is combined with capabilities in data and analytics, automation, cloud and digital, is enabling to drive business transformation. The Company offers Tron intelligent automation, digital process transformation, application services, business process services, cyber security, among others. It serves industries such as travel and transportation, insurance, banking and financial services and enterprise services.

Provider
Motilal Oswal
Motilal Oswal

​Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance. 

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

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