Report

MOSL: NIIT TECHNOLOGIES (Neutral)-Strong performance despite seasonal weakness and client issues

NIIT Technologies: Strong performance despite seasonal weakness and client issues

(NITEC IN, Mkt Cap USD1.0b, CMP INR1121, TP INR1100, 2% Downside, Neutral)

 

  • Strong growth despite issues: NITEC’s revenue grew 3.3% QoQ CC in 1QFY19, exceeding our estimate of 1.1% growth, as GIS seasonality and ramp-down in Morris were more than offset by strength in other verticals. EBITDA margin shrank 220bp QoQ to 15.8% (in-line) due to wage hikes, visa expenses and a decline in GIS. PAT fell 0.3% QoQ – a 10% beat led by better-than-expected revenue growth and higher other income.
  • Broad-based traction encouraging: Decline in GIS and Morris was reflected in de-growth of 5% in ‘Others’. However, growth in the other three verticals was sanguine: 8.8% QoQ in BFS, 10% QoQ in Insurance and 7.7% QoQ in Travel. Similarly, while growth in top accounts was bogged down by Morris, growth and outlook remained robust for the rest of the clients.
  • Expect improvement going forward: NITEC expects both growth and profitability to improve – this confidence stems out of: (i) broad-based traction, (ii) sustained deal flow (won USD151m TCV in 1QFY19 v/s USD110m a year ago), (iii) strengthening of leadership across verticals from Tier-I peers, (iv) traction in newer capabilities like cloud and data automation, (v) higher growth in Digital (53% YoY growth; now 27% of total revenue) and (vi) the worst in Morris now behind.
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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