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SBICAP Securities
NIIT Tech (Hold)
CMP: ₹350.55
Target: ₹370
NIIT Technologies results met low expectations, but failed to boost optimism on growth recovery. Revenues increased 1.2 per cent q-o-q to ₹595.3 crore (SSLe of ₹601.3 crore). Revenue from purchase for resale (PFR) grew to ₹18.7 crore on the back of execution of a government order. However, hardware sales remained stable q-o-q at ₹5.7 crore. Hedging gains stood at ₹9.87 crore vs. ₹9.6 crore q-o-q. Sequentially, Ebitda margin improved 51 bps to reach 14.5 per cent (SSLe of 14.6 per cent), driven by a) productivity initiatives; b) offshore shift; and c) weaker rupee. Depreciation declined 9.1 per cent q-o-q due to alignment of useful life of software assets to life of contract in AAI (Airports Authority of India).
Earnings call takeaways: a) Digital technologies contributing 8-9 per cent of revenues; b) capex at ₹31.9 crore for 3QF15, around ₹175 crore expected for F15e; c) depreciation run-rate to increase further and normalise in F16e; d) capex estimate for AAI at around ₹140 crore vs. earlier estimate of ₹50 lakh (Q2-end estimate around ₹120 crore); and e) headcount decreased by 229 employees to 8,059.
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