>NIIT TECHNOLOGIES LIMITED: Result Update Q1FY11

NIIT Tech reported a good first quarter. The YoY topline Growth is 33% and QoQ growth is 21%. The spike is on account of BSF order being included. Excluding the order the growth is still at a YoY level of 21%.

The company has bagged a good chunk of domestic business. They are also participating in the R-APDRP program just like other IT players, as a System Integrator. Overall 9% of revenue contribution is through the Govt Segment. The longer term implication of this would be a slightly reduced margin since Govt contracts are price competitive. Also, there would be a general increase in the average number of receivable days.

The company is clocking really good capacity utilization of about 82% consistently. This might be because of strictly controlled hiring in order to maintain the margin.

Cash position of the company stands at Rs. 217.9 crores as of June 2010. The company does have an exposure to the European market, and has shown a decline of ~3% this quarter. How it impacts the longer term revenue from EU is to be seen.

Valuation:
There has been no change in the assumptions so far and the business is being valued at less than 2 times sales, which seems to be fair at CMP Rs. 193.0. The business isn't ridiculously priced to merit a sell call either. We recommend to keep holding on to it.

Although Mphasis still looks good at CMP Rs. 607.0

To read the full report: NIIT TECHNOLOGIES