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MOSL: NIIT TECHNOLOGIES (Neutral)-Broad-based growth, intact deal momentum lays foundation for FY20

NIIT Technologies: Broad-based growth, intact deal momentum lays foundation for FY20

(NITEC IN, Mkt Cap USD1.1b, CMP INR1268, TP INR1400, 10% Upside, Neutral)

  • 4Q revenues marginally weak due to contract deferral: FY19 revenues grew 17.6% YoY in CC, a significant improvement over FY18’s 9.7%. EBITDA grew 28.7% YoY with OPM up 80bp to 17.6%; PAT rose 44% YoY to INR4,044m. 4QFY19 CC revenue grew 1.3% QoQ (17.3% YoY), below our estimate of 3% QoQ, led by deferral in a contract in the Insurance segment. EBITDA margin excluding one-offs was 18.1% (-10bp QoQ), in line with our est. of 18.2%. PAT was INR1143m, +14% QoQ and 33% YoY, a 4% beat to our est. due to lower tax rate (21.2% v/s est. of 23.5%)
  • Impressive revenue recovery underlined by broad-based performance: NITEC’s impressive FY19 performance was underlined by 17-35% YoY growth across verticals, led by Insurance. In terms of geographies too, the focused ones -- the US (22% YoY) and EMEA (32% YoY), saw growth across all industries. Growth has been accompanied with operational rigor, which saw SGA decline 180bp YoY to 17.3%.
  • Deal wins, order book lend visibility of sustained momentum: NITEC’s order intake in FY19 was USD646m, up 27% YoY. Its executable order book over the next 12 months stands at USD390m, +15% YoY. This lends visibility of continued revenue momentum in the foreseeable future. Although performance in Insurance dropped this quarter, it was not on account of any macro concerns; and the deferred contract is close to getting signed. Even the Capital Market segment for NITEC is expected to generate continued traction amidst varied commentaries on outlook across peers (buy-side segment of capital markets dominates NITEC’s BFS exposure).
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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