NIIT Technologies Ltd

Niit Technologies the demerged entity from Niit Ltd is a software provider
The company Compounded Quarterly Growth rate in Earning has remained 33%with a OPM% of around 39
The company is expected to post annual turnover of Rs. 291 Crore with at Net Profit of Rs.101.8 crore for 2006-07 as detailed below

(Rs in Crore except EPS )
Total Income 291.3
Total Expense 166.5
OPBIDT 124.8
OPM 42.8%
Depreciation 22.1
Interest 0.9
N Profit 101.8
NPM 34.9%
EPS 26.2

Target 550 at PE of 21

THe Target Earning and Net Profit for 2007-08 are Rs. 396 Crore and Rs.165 Crore respectively transalting into a earning of Rs 38.3 per share

The current market price is 401 and the Future PE based on 06-07 earning are 15.7 and that of 07-08 is 10.5

this stock is an excellent buy in dips

Investment Ideas: NIIT Technologies

A good order-book, balanced geographic spread and the recent
acquisition of Room Solutions lends confidence to the stock.

At Rs 398, the NIIT Technologies stock is a good choice for investors
with a one/two-year horizon. The stock trades at a multiple of 19
times its trailing consolidated four-quarter per-share earningsDec'06.
Investors can use any weakness linked to the broad market to step up
exposure.

The company's focus on select key verticals such as BFSI (banking,
financial services and insurance) and transportation, a strong
order-book position, the balanced geographic mix and the recent
acquisition of the UK-based Room Solutions is encouraging. The risks
to our recommendation are the integration issues surrounding Room
Solutions, any sharp rupee appreciation vis-a-vis the dollar and
supply-side manpower-related issues affecting mid-size companies.

NIIT Technologies can use multiple levers such as an improvement in
BPO margins, enhanced contribution from offshore, and better control
over SG&A to shore up margins. At present, the BPO segment contributes
only about 6 per cent of revenues, with the balance coming from
software services.

The company has $90 million worth firm orders executable over the next
12 months. In the latest quarter, the company won new business worth
$38 million, including a $20-million order from an existing client in
the transport space.

This highlights the cross-selling opportunities and mining the
potential of NIIT Technologies' top five or top ten clients.

The acquisition pep

In early May06, the company acquired 51 per cent in Room Solutions, a
UK-based IT solutions firm (with intellectual property) focussed on
the insurance space.

Through this acquisition that focuses on the property and casualty
space, NIIT is trying to plug a gap in its insurance portfolio. With
revenues of $25 million, NIIT Technologies will be acquiring Room
Solutions for about one times revenues.

This is also likely to complement the company's presence in life and
pension space. Since Room Solutions has a large client base in the
property and casualty space evenly spread out, it opens up
cross-selling possibilities, the impact of which will be felt over the
next one year.

According to NIIT Technologies, there will be near-term margin
pressures on account of integration and transition costs of Room
Solutions, but that will be recovered over the next couple of
quarters.

Apart from building its offerings around an integrated IT and BPO
platform, the company also recently forayed into the emerging area of
remote infrastructure management and managed services.

It announced last week that it has set up a 50:50 joint venture with
the Switzerland-based Adecco, a global major in HR services.

Source: Business Line