NIIT Q1 Review - Mixed Results; Commentary On Growth Remains Optimistic: Dolat Capital

Dolat Capital Report

NIIT Ltd. reported revenue growth of 11% QoQ (above our estimate 8%) driven by healthier performance in tech sector which grew by 14.4% QoQ, while banking grew 4.8% QoQ. OPM stood at -8.1% (our estimate -3.8%) declined by 201 basis points QoQ, led by 39% QoQ rise in outsourcing costs.

Management retained revenue guidance of Rs 3.8-Rs 4 billion and low single digit Ebitda margin for FY25. The company highlighted that it is witnessing some green shoots and expects IT hiring to pick up gradually, with a large part coming in H2FY25. Headcount stood at 752 (declining since past eight quarters).

We expect NIIT’s growth to be driven by gradual uptick in tech and sustained traction in banking, financial services and insurance, but the need to invest in newer offerings may hurt margins in near term. Factoring Q1 commentary we cut our FY25/FY26E earning per share estimates by 20.7%/3.8% and maintain ‘Reduce’ rating with a target price of Rs 130 valued at 24 times of FY26E earning per share.

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