• The revenue growth in Q3 was 11.8%, led by improvement in gross margins by 18.1%. Over the last three years (FY17-20), EBIT margins for NIIT Tech have improved by 200bps to 13.4%, while LTTS has witnessed an improvement of only 90bps. On the other hand, EBIT margins for its peer LTI and MindTree remained flat during FY17-20E. Also, NIIT Tech has invested in hiring senior management resulting in new logos.
• Compared to the peer group, on an average, the cash conversion is 5-7% higher for the same time period and reflects collection efficiency, which is lagging in the peer set, as is evident from DSOs (including unbilled days) of 76 days compared to 82 – 105 days for the peer set.
• The 1Yr FW P/E multiple is at 16x the increase in multiple is being attributed to consistency and predictability in revenue growth driven by strong order book, ability to improve operating margins and superior cash conversion. However, downside risks to PE multiple remains.
Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.
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