In 4QFY16, NIIT Tech revenue stood at INR 6,847mn (up 12.0% YoY and +0.9% QoQ). Revenue declined in dollar terms by 1.6% QoQ to USD 101.7mn. In CC terms, revenue growth was flat QoQ. Growth was soft due to closure of large projects in travel and transportation vertical. EBITDA margins expanded by 20bps QoQ at 18.4% in 4QFY16, driven by healthy increase in GIS business, lower SG& A expenses and currency tailwinds. PAT margin rose by 60bps QoQ on the back of lower effective tax rate in 4QFY16. DSO declined by 10 days QoQ to 80 days.The company’s order book, executable over the next 12 months was flat at USD 301mn. During the quarter NIIT added 4 clients, 2 each in USA and RoW and received fresh order intake of USD 120mn (US: USD 30mn, EMEA: USD 61mn and RoW USD 28mn).
Valuation: Management expects the growth momentum to pick up in the remaining quarters and has guided for double digit growth in FY17 aided by healthy order bookings and traction in digital business. However, management indicated that 1QFY17E is likely to be soft quarter due to seasonality in its GIS business. The stock is currently trading at 10.5/9.1/8.2x of FY16/17E/FY18E EPS. We have arrived at a target price of INR 588 (earlier 564), valuing the stock at 10X FY18E EPS and maintain a BUY rating on the stock.