NIIT Technologies LTD. , We recommend Buy between 200 -240 with a price target of 310 -330 -390. The Scrip has formed a cup with handle pattern at the bottom for the past 4 -6 weeks. We Witness a good volume at the bottom. A weekly Close above 250 would move the stock to the Target.
Company Outlook • Till date, no impact of the US sub-prime crisis is anticipated by NIITT's clients • The company has not faced any scale-downs, cancellations of projects from any of the clients • There is potential for good scale up in recent projects in the travel, transportation and logistics vertical. Pilots are under way. • The scale-down of revenues from the insurance BPO client in Q 2 FY 08 has not spilled over to Q 3 FY 08 • The Adecco JV is expected to scale up fast post the likely receipt of a large order • NIITT is hedging over a longer period with a view to restricting the impact of rupee appreciation We maintain our EPS estimates at Rs. 24 for FY 08 and Rs. 28 for FY 09. We maintain our price target at Rs. 346. Target FY 09 P/E of 12. 4 x.
Company Outlook We recommend BUY in view of the recent price correction. Potential entry of a strategic partner through sale of NIIT Ltd’s 25% stake in NIITT could be a positive for the stock. An accelerated slowdown/recession in major user economies and a sharperthan- expected appreciation in the rupee v/s major currencies are key risks.
Revenues • The prevailing economic conditions in the US economy have not had any impact on the company. The financial services vertical contributed about 42% to FY 07 revenues. • None of the clients of the company are directly involved in the sub-prime business in the US. They have also indicated that, as on date, they do not anticipate any impact on their operations. • The recent wins in the travel, transport and logistics vertical have significant potential for scaling up. The company is conducting pilot projects for these clients and further projects can be expected going ahead. • The company's JV with Adecco is in the process of negotiating a large order from one of Adecco's large clients, which is expected to significantly increase the visibility for the JV. • Room Solution's H 1 FY 08 revenue growth was impacted as it is in the process of transferring its solutions on a new platform. The whole process is expected to be completed by Q 4 FY 08 post which new orders are expected to flow in. • In BPO, one of the large clients in the insurance segment scaled down business with NIIT in Q 2 FY 08.
Margins • EBIDTA margins during Q 2 FY 08 were sustained at Q 1 FY 08 levels. This was despite the increase in employees, some salary hikes and the rupee appreciation. • The company reduced the proportion of employees employed on-site and also initiated other cost control initiatives, which allowed it to protect margins. • We believe the company should be able to improve the margins in H 2 FY 08 as the impact of salary increases wanes and the company adopts more cost control initiatives. • We maintain our earnings estimates. We have assumed the rupee will end FY 08 at Rs. 39 per US dollar and FY 09 at Rs. 38. 50 per US dollar. • We expect BPO revenues to grow to Rs. 612 mn in FY 09 v/s Rs. 553 mn in FY 07. IT services revenues are expected to cross the Rs. 10 -bn mark in FY 09. • EBIDTA margins are expected to improve from Q 2 FY 08 levels due to improved utilization levels, improvement in BPO margins and improved performance of ROOM in addition to leverage on SG&A expenses. Net profits are expected to grow to Rs. 1. 41 bn in FY 08 and Rs. 1. 64 bn in FY 09, translating into earnings of Rs. 24 and Rs. 28, respectively.
Future Projections
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Скачать презентацию NIIT Technologies LTD We recommend Buy between
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