BUY CMP 493.05 Target Price 560.00 NIIT TECHNOLOGIES LTD Result Update (PARENT BASIS): Q2 FY16 OCTOBER 17 th, 2015 ISIN: INE591G01017 Index Details Stock Data Sector IT Consulting & Software BSE Code 532541 Face Value 10.00 52wk. High / Low (Rs.) 539.00/332.00 Volume (2wk. Avg.) 42000 Market Cap (Rs. in mn.) 30105.63 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY15A FY16E FY17E Net Sales 13460.90 15130.05 16643.06 EBITDA 2513.50 2992.82 3417.32 Net Profit 1475.90 1891.27 2175.62 EPS 24.18 30.97 35.63 P/E 20.39 15.92 13.84 Shareholding Pattern (%) (QUARTERLY) As on Sep-15 As on Jun-15 PROMOTER 30.84 30.87 FIIs 32.04 28.08 DIIs 21.14 24.07 OTHERS 15.98 16.98 1 Year Comparative Graph NIIT TECHNOLOGIES LTD BSE SENSEX SYNOPSIS NIIT Technologies Ltd. is a leading IT solutions organization, servicing customers in North America, Europe, Asia and Australia. Net profit for the Q2 FY16 was Rs. 3726.20 million against Rs. 3192.00 million in the corresponding quarter of the previous year, an increase of 16.74%. The company s net sales stood at Rs. 3726.20 million in Sept quarter from Rs. 3192.00 million over the corresponding quarter last year. EBIDTA was up by 8.38% to Rs. 674.80 mn in Q2 FY16 as against Rs. 622.60 mn over the same quarter previous year. In Q2 FY16, Other income rose by 124.80% y-o-y of Rs. 28.10 million as compared to Rs. 12.50 million in Q2 FY15. The company s Business in the US grew 6.2% sequentially contributing to 46% of overall revenues during the quarter. Order intake during the quarter was USD 80mn resulting in USD 300mn of order book executable over the next 12 months. During the quarter, the Company added 4 new logos, three of them in the Travel segment. 364 people were added during the quarter taking the headcount to 9592. Utilization improved to 79.7%. Attrition reduced further to 13.7%. Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 7% each over 2014 to 2017E. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) NIIT Technologies Ltd 493.05 30105.63 24.18 20.39 2.95 95.00 Infinite Computer Solutions India Ltd 179.10 7185.10 25.30 6.17 1.32 40.00 Sonata Software Ltd 152.85 16073.60 11.29 13.54 4.50 700.00 Zensar Technologies Ltd 973.75 43290.60 45.48 21.41 5.62 110.00
QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q2 FY16, Months Sep-15 Sep-14 % Change Net Sales 3726.20 3192.00 16.74 PAT 411.90 581.50 (29.17) EPS 6.74 9.56 (29.50) EBITDA 674.80 622.60 8.38 NIIT Technologies Ltd achieved a turnover of Rs. 3726.20 million for the 2 nd quarter of financial year 2016 as against Rs. 3192.00 million in the corresponding quarter of the previous year. The company has reported an EBITDA of Rs. 674.80 million, increase by 8.38% in Q2 FY16. During the 2 nd quarter, Net profit is Rs. 411.90 million against Rs. 581.50 million reported in the corresponding quarter of the previous year. The company has reported an EPS of Rs. 6.74 for the 2 nd quarter as against an EPS of Rs. 9.56 in the corresponding quarter of the previous year. Break up of Expenditure Particulars Rs. Million Q2 FY16 Q2 FY15 CHG % Purchase of Stock-in-Trade 66.80 64.50 4% Employees benefits expense 2110.80 1806.10 17% Depreciation and amortisation expense 194.50 182.30 7% Other expenses 845.10 710.50 19%
Latest Updates Business in the US grew 6.2% sequentially contributing to 46% of overall revenues during the quarter. EMEA grew by 5.8% contributing to 35% of the mix, and the revenue share from APAC and India stood at 10% and 9% respectively. Among industry segments, BFSI grew 8.3% sequentially due to growth in insurance business in USA and NITL in UK. BFSI now contributes to 37% of total revenues, Travel and Transportation grew 6.6% also contributing to 37% of revenue mix, Manufacturing/Distribution contributed to 8% while share of domestic Government business reduced to 3% of the revenue mix. Order intake during the quarter was USD 80mn resulting in USD 300mn of order book executable over the next 12 months. During the quarter, the Company added 4 new logos, three of them in the Travel segment. 364 people were added during the quarter taking the headcount to 9592. Utilization improved to 79.7%. Attrition reduced further to 13.7%.
COMPANY PROFILE NIIT Technologies is a leading global IT solutions organization, servicing customers in Americas, Europe, Middle East, Asia and Australia. It offers services in Application Development and Maintenance, Infrastructure Management, IP Asset or Platform Solutions, Business Process Management, and Digital Services to organisations in the Financial Services, Travel & Transportation, Manufacturing/Distribution, and Government sectors. The Company adheres to major global benchmarks and standards, having secured the ISO 9001:2000 certifications and the ISO: 27001 Information Security Management accreditation. NIIT Technologies also follows global standards of development. It has been assessed at Level 5 of SEI CMMi version 1.2. NIIT Technologies Business Process Management conforms to the highest quality standards such as COPC. Its data centre operations are assessed at the international ISO 20000 IT management standards. Product and services NIIT Technologies has successfully partnered with companies such as ING Group, British Airways, SEI Investments, Singapore Airlines, Toshiba, Office Depot, Ministry of Defense Singapore, helping them reach their business goals in a cost effective way without compromising on quality. In this competitive world the company initiated following services to customers Application development Management Managed Services Testing Services Cloud Computing BPO Geographic Information System (GIS) Solutions $ Services Digital Services
FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March 31 st, 2014-2017E FY14A FY15A FY16E FY17E I EQUITY AND LIABILITIES A) Shareholder's Funds a) Share Capital 607.00 610.45 611.10 611.10 b) Reserves and Surplus 8676.30 9588.00 10978.26 12515.22 Sub-Total- Total Net worth 9283.30 10198.45 11589.36 13126.32 B) Non Current Liabilities a) long term borrowing 48.90 46.20 44.35 43.46 b) Long Term Provisions 280.30 306.22 324.59 337.58 Total Non Current liabilities 329.20 352.42 368.95 381.04 C) Current Liabilities a) Short term borrowings 215.00 200.00 210.00 216.30 b) Trade payables 991.10 1299.27 1507.15 1688.01 c) Other Current liabilities 1394.20 1237.55 1293.24 1332.04 d) Short Term Provisions 0.00 1259.44 1335.01 1388.41 Sub-Total- Current Liabilities 2600.30 3996.26 4345.40 4624.76 TOTAL EQUITY AND LIABILITIES (A + B + C) 12212.80 14547.13 16303.70 18132.11 II APPLICATION OF FUNDS D) Non-Current Assets Fixed Assets i. Tangible assets 2587.73 3102.31 3611.09 4152.75 ii. Intangible assets 121.34 655.37 838.87 1031.81 iii. Capital Work in Progress 1159.53 1160.00 1231.92 1293.52 a) Sub-Total- Fixed Assets 3868.60 4917.68 5681.88 6478.08 b) Deferred tax assets 103.20 260.14 334.02 410.84 c) Other non-current assets 50.80 60.91 70.05 77.75 d) Non-current investments 1234.20 2107.52 2571.17 3085.41 e) Long Term loans and advances 433.50 495.36 556.78 612.46 Sub-Total-Non-Current Assets 5690.30 7841.61 9213.91 10664.55 E) Current Assets a) Current Investments 400.60 231.88 257.39 277.98 b) Inventories 47.90 82.36 97.18 112.73 c) Trade receivables 4316.50 4419.89 4560.50 4698.34 d) Cash and Bank Balances 486.40 735.25 897.01 1049.50 e) Short-terms loans & advances 818.80 786.83 810.43 847.71 f) Other Current Assets 452.30 449.31 467.28 481.30 Sub-Total-Total Current Assets 6522.50 6705.52 7089.79 7467.56 TOTAL ASSETS (D+E) 12212.80 14547.13 16303.70 18132.11
Annual Profit & Loss Statement for the period of 2014 to 2017E Value(Rs.in.mn) FY14A FY15A FY16E FY17E Description 12m 12m 12m 12m Net Sales 13084.80 13460.90 15130.05 16643.06 Other Income 741.60 224.20 435.84 488.15 Total Income 13826.40 13685.10 15565.90 17131.20 Expenditure -10684.20-11171.60-12573.07-13713.88 Operating Profit 3142.20 2513.50 2992.82 3417.32 Interest -16.70-34.50-41.40-47.20 Gross profit 3125.50 2479.00 2951.42 3370.13 Depreciation -420.20-665.20-764.98-849.13 Exceptional Items 0.00-134.80 0.00 0.00 Profit Before Tax 2705.30 1679.00 2186.44 2521.00 Tax -621.30-203.10-295.17-345.38 Net Profit 2084.00 1475.90 1891.27 2175.62 Equity capital 607.00 610.40 611.10 611.10 Reserves & Surplus 8676.30 9588.00 10978.26 12515.22 Face value 10.00 10.00 10.00 10.00 EPS 34.33 24.18 30.95 35.60 Quarterly Profit & Loss Statement for the period of 31 st Mar, 2015 to 31 st Dec, 2015E Value(Rs.in.mn) 31-Mar-15 30-Jun-15 30-Sep-15 31-Dec-15E Description 3m 3m 3m 3m Net sales 3631.00 3617.30 3726.20 3830.53 Other income 32.90 319.10 28.10 39.90 Total Income 3663.90 3936.40 3754.30 3870.44 Expenditure -3195.30-2884.50-3079.50-3129.55 Operating profit 468.60 1051.90 674.80 740.89 Interest -8.10-15.70-8.20-8.77 Gross profit 460.50 1036.20 666.60 732.12 Depreciation -166.90-193.20-194.50-204.23 Exceptional Items -384.80 0.00 0.00 0.00 Profit Before Tax -91.20 843.00 472.10 527.89 Tax 94.00-120.30-60.20-76.54 Net Profit 2.80 722.70 411.90 451.35 Equity capital 610.40 610.60 611.10 611.10 Face value 10.00 10.00 10.00 10.00 EPS 0.05 11.84 6.74 7.39
Ratio Analysis Particulars FY14A FY15A FY16E FY17E EPS (Rs.) 34.33 24.18 30.95 35.60 EBITDA Margin (%) 24.01 18.67 19.78 20.53 PBT Margin (%) 20.68 12.47 14.45 15.15 PAT Margin (%) 15.93 10.96 12.50 13.07 P/E Ratio (x) 14.36 20.39 15.93 13.85 ROE (%) 22.45 14.47 16.32 16.57 ROCE (%) 37.31 30.43 31.73 31.87 Debt Equity Ratio 0.03 0.02 0.02 0.02 EV/EBITDA (x) 9.33 11.69 9.77 8.50 Book Value (Rs.) 152.94 167.08 189.65 214.80 P/BV 3.22 2.95 2.60 2.30 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs. 493.05 the stock P/E ratio is at 15.93 x FY16E and 13.85 x FY17E respectively. Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs. 30.95 and Rs. 35.60 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 7% each over 2014 to 2017E respectively. On the basis of EV/EBITDA, the stock trades at 9.77 x for FY16E and 8.50 x for FY17E. Price to Book Value of the stock is expected to be at 2.60 x and 2.30 x respectively for FY16E and FY17E. We recommend BUY in this particular scrip with a target price of Rs. 560.00 for Medium to Long term investment.
INDUSTRY OVERVIEW The Indian IT-BPM industry During the financial year under review (FY2015), the Indian IT-BPM (Information Technology & Business Process Management) industry is likely to have grown by about 13% to US$146 billion, with exports growing by 12.3% to US$98 billion, as per NASSCOM. IT Services exports are estimated to have grown by 12.6% to more than US$ 55 billion during the same period. The future outlook for the industry remains healthy, with NASSCOM projecting a growth of 12% to 14% during the next financial year FY2016 for exports from the Indian IT-BPM industry. Delivery of such growth in the coming year and beyond that is expected to increasingly depend upon the industry s ability to innovate and adapt to the multiple and momentous changes transpiring within the technology and demand landscape, led by the advent and embracement of Digital and SMAC (Social/Mobility/ Analytics/Cloud) technologies by businesses worldwide. Industry players such as NIIT Technologies that are sharply focused on specific industry verticals and have been making investments in these new areas over a sustained period of time are likely to be better prepared to meet the challenges generated by the shifts in customer expectations, demand trends, and service/solutions delivery dynamics. Outlook The year under review has been one of transition and transformation, as the Company continued with its efforts to re-organize and re-orient itself to capitalize on high potential opportunities while adapting to the ongoing shifts in the technological and demand landscape. It has made the investments necessary to build capabilities and create an innovation-led service culture aimed at delivering exceptional value. The Company already possesses a strong traditional IT services & solutions operation and has moved swiftly to reinforce its capabilities in its fastgrowing new technologies based business that includes Digital Services. The Company has been witnessing encouraging traction in Digital Services and work related to the digital transformation of customer organisations, and these are likely to emerge as one of the key growth drivers for NIIT Technologies going forward. Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document.
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