NIIT Technologies’ (NITEC) Q4FY17 revenues (excl. one-time settlement gains) grew 3.4% q-o-q (+4.6% y-o-y) to Rs 7.16b, above our estimate of Rs 6.98b. EBITDA grew by 1.8% y-o-y to Rs 1.28b and PATF by 2.5% y-o-y to Rs 810m (excl. one-offs). ~4% q-o-q growth in BFSI helped drive revenue beat for the quarter. For full-year FY17, revenues grew by 4% y-o-y to Rs 27.7b, EBITDA by 2.3% y-o-y to Rs 4.7b, while PAT declined by 0.7% y-o-y to Rs 2.62b.
EBITDA margin expanded 100bp q-o-q to 17.9%, above our estimate of 17.5%. PAT excluding one-offs grew 12.5% q-o-q to Rs 810m, well above our estimate of `667m as operating beat was compounded by a lower tax rate of 16% (est. Of 24%).
NITEC expects revenue growth in FY18 to be higher than FY17, led by: broadbased traction in BFSI, opportunity in GIS from Smart Cities and continued momentum in Digital. Also, SGA efficiencies and a number of ongoing programs, combined with soft wage hikes, should help drive margin expansion (from 16.6% in FY17) despite a stronger rupee.
We expect dollar revenue CAGR of 6.5% and earnings CAGR of 9.4% over FY17-19E. NITEC trades at 11.1/10.2x FY18/19E. Our TP of Rs 470 discounts FY19E EPS by 10x – the multiple being a function of missing consistency in deal wins, ongoing lumpiness in revenue growth and consequent below-industry growth rate.
Excluding a one-time settlement fees in a government contract, NITEC’s Q4FY17 revenues grew 3.4% q-o-q and 4.6% y-o-y to `7.16b, above our estimate of `6.98b. EBITDA margin expanded 100bp q-o-q to 17.9%, above our estimate of 17.5%, led majorly by SGA rationalisation, which was down 60bp q-o-q to 18.7%, compared to our estimate of 19.4%. Utilisation improved by 100bp q-o-q to 81% during the quarter, which partly contributed to the margin beat.
Consequently, excluding exceptional items, PAT during the quarter was Rs 810m, +12.5% q-o-q and 2.5% y-o-y, well above our estimate of Rs 667m. Operating beat was compounded by lower taxation during the quarter (16%), contributing to significant beat on PAT.
Americas and RoW led growth among geographies and BFSI led growth among verticals. In services, growth was lopsided and came mainly from SI & PI, which contributed 64% of incremental revenues during the quarter on a small base. Top clients saw healthy momentum with both top-5 (+6.6% q-o-q) and top 6-10 (+12.8% q-o-q) accounts witnessing healthy traction. The company signed a total of $112m worth of contracts, compared to $119m in Q4FY16 and $101m in Q3FY17.