Result Update: NIIT Ltd - BUY - TP Rs.125 - KotakNIIT Ltd 1QFY19 revenue were below our estimates at Rs.2142mn v/s our estimate of Rs.2339mn. Margins at 8.9% were about 50bps lower than our estimates. The miss was largely due to SNC and school business which continue to remain impacted.
- NIIT Ltd 1QFY19 performance was below our estimates on all fronts. Revenue declined by 3.8% QoQ. EBIDTA margin at 8.9% were too below our estimates by about 50bps due to lower than expected margins in SNC (-1.6%) and school business (-23%). Corporate Learning Group (CLG). CLG (65% of revenue) has been leading the performance and is expected to continue the momentum going forward with integration of Eagle Productivity business (Rs.196mn contribution in 1Q).
- SNC and school business reported a de growth of 21% (like to like basis) and 62% YoY respectively. SNC was impacted due to freeze in hiring in banking and IT companies, it is expected to remain so for few more quarters. School business was impacted due to exit from government school business which should stabilize post 2Q. Going forward the focus would be on IP led and private school business.
- Revenue visibility and fresh order intake remains strong for CLG business at USD 25.7mn and USD 217mn respectively. Within SNC business share of beyond IT and enrollment was down to 36% and 33081 from 38% and 40309 in previous quarter. We believe the decline in enrollments could be due to seasonality factors but decline in share of beyond IT could be a cause of concern.
Valuation & outlook
- SNC and school business have been a constant drag on overall financial performance of the company, and we believe it would take few more quarters to stabilize. CLG continues to report 20%+ growth and management remains confident of continuing the momentum going forward. We have lowered our revenue estimates and expect revenue growth of 9% CAGR over FY18-20E and EBITDA margin to improve by 250bps (v/s 300bps earlier) over FY18-20E. We maintain BUY with a revised target price of Rs.125 (Rs.130 earlier).
Shares of NIIT LTD. was last trading in BSE at Rs.93.7 as compared to the previous close of Rs. 92.35. The total number of shares traded during the day was 184251 in over 1141 trades.
The stock hit an intraday high of Rs. 94.7 and intraday low of 92.5. The net turnover during the day was Rs. 17252556.