(NIITEC) | 1049content.icicidirect.com/mailimages/IDirect_NIITTech_Q4FY18.pdf · NIIT Tech reported...

May 10, 2018

ICICI Securities Ltd | Retail Equity Research

Result Update

Large deal momentum to remain strong…

US$ revenues grew 4.7% QoQ to $122.2 million, better than our

expectation of 2.7% and $119.8 million. Revenues in constant

currency grew 4.3% QoQ

Rupee revenues increased 4.3% QoQ to | 788.8 crore, better than

our estimate of | 771.2 crore

At 18.0%, EBITDA margins expanded 90 bps QoQ, above our 60 bps

expansion and 17.7% estimate mainly on account of increased digital

and product business as well as operational efficiencies

Reported profit grew 13.7% sequentially to | 86.1 crore, ahead of our

estimates of | 83.1 crore on account of a better-than-expected

operating performance. However, it was partly offset by a higher

effective tax rate (22.8% vs. 16.5% in Q3FY18)

Organisation changes driving acceleration in growth…

The management has undertaken a restructuring exercise to drive growth

through changes in the leadership team, reorganising itself as a vertical

driven organisation and modifications in incentive structure. These

changes are visible in NTL key metrics such as Order intake: improved

from $110 million in Q1 to $145 million in Q4FY18; Number of $ mn

clients increased from 72 in Q1FY18 to 80 in Q4FY18; traction in large

deal momentum (H1:2, H2FY18:5 deals); Digital contribution as % of

revenues inching up from 21% in Q1FY18 to 26% in Q4FY18 and Top 5

clients concentration reducing from 33% in Q1 to 29% in Q4FY18. Going

ahead, the management remains positive of winning at least seven large

deals in FY19E.

Expects double digit revenue growth (CC) on organic basis in FY19E…

The company reported healthy growth in the quarter, driven by growth in

insurance segment and digital engagements. Insurance segment grew

12.8% QoQ, led by growth in the NITL business and digital pipeline.

Digital, which now forms 26% of revenues (vs. 21% in Q4FY17) grew 9%

QoQ, 37% YoY. NTL reported 9.7% YoY topline growth in constant

currency (CC) terms. For FY19E, the management expects double digit

growth in revenue on an organic basis in CC terms. The healthy outlook is

on the back of order book attained in FY18, deal win momentum and

positive stance for travel & transport and BFSI. Overall, we expect its

dollar revenues to grow at 12.1% CAGR to US$582 million in FY18-20E.

Healthy margin led by revenue growth, beats estimates…

EBITDA margins expanded 90 bps to 18% in the quarter owing to healthy

revenue growth, growth in high margin segments of digital and

optimisation of SG&A. On the back of healthy outlook on the revenue

front and increasing contribution of high margin digital segments, the

management expects margins in FY19E to be better compared to FY18.

NTL ended FY18 with EBITDA margins of 16.8%. Overall, we build in

EBITDA margin at 17.2% and 17.5% in FY19E and FY20E, respectively.

Growth potential seems to be captured in stock; maintain HOLD…

NIIT Tech reported Q4FY18 results wherein it reported a much better-

than-expected operating performance. The commentary on the outlook

front is positive with strong order intake. Hence, we tweak our estimates

and now anticipate rupee revenue, PAT to grow at a CAGR 12.5%, 17.6%,

respectively, in FY18-20E. However, after the sharp run up in the last six

months, the stock now captures the growth potential leaving limited

upside at the current level. Hence, we maintain our HOLD rating with a

revised target price of | 1075 (17x FY20E EPS).

NIIT Technologies (NIITEC) | 1049

Rating matrix

Rating : Hold

Target : | 1075

Target Period : 12 months

Potential Upside : 2%

What’s changed?

Target Changed from | 775 to | 1075

EPS FY19E Changed from | 52.2 to | 52.9

EPS FY20E Changed from | 59.8 to | 63.2

Rating Unchanged

Quarterly performance

Q4FY18 Q4FY17 YoY (%) Q3FY18 QoQ (%)

Revenue 789 745 5.9 757 4.3

EBITDA 142 156 (9.3) 130 9.4

EBITDA (%) 18.0 21.0 -301 bps 17.1 85 bps

PAT 86 109 (21.0) 76 13.7

Key financials

| Crore FY17 FY18E FY19E FY20E

Net Sales 2,802 2,991 3,371 3,785

EBITDA 485 501 580 662

Net Profit 250 280 325 388

EPS (|) 40.8 45.6 52.9 63.2

Valuation summary

FY17 FY18E FY19E FY20E

P/E 23.4 23.0 19.8 16.6

Target P/E 24.0 23.6 20.3 17.0

EV / EBITDA 6.3 5.6 4.4 3.3

P/BV 3.5 3.5 3.1 2.7

RoNW (%) 14.8 15.1 15.4 16.1

RoCE (%) 29.8 32.8 38.1 44.7

Stock data

Particular Amount

Market Capitalization (| Crore) 3,758.4

Total Debt (| Crore) 6.4

Cash and Investments (| Crore) 410.8

EV (| Crore) 3,354.0

52 week H/L 1190 / 463

Equity capital 61.2

Face value 10.0

Price performance

1M 3M 6M 12M

TechMahindra 4.3 5.0 43.4 53.4

MindTree 23.1 44.9 109.8 104.9

KPIT Tech 16.8 25.7 66.3 101.4

NIIT Tech 17.6 26.8 64.8 98.7

Research Analyst

Deepak Purswani, CFA

[email protected]

Deepti Tayal

[email protected]


Variance analysis

Q4FY18 Q4FY18E Q4FY17 YoY (%) Q3FY18 QoQ (%) Comments

Revenue 788.8 788.8 744.7 5.9 756.5 4.3

US$ revenues grew 4.7% QoQ to $122.2 million, better than our expectation

of 2.7% and $119.8 million estimate

Employee expenses 500.0 500.0 458.7 9.0 481.1 3.9

Gross Margin 288.8 288.8 286.0 1.0 275.4 4.9

Gross margin (%) 36.6 36.6 38.4 -179 bps 36.4 21 bps

SG&A expenses 147.0 147.0 129.7 13.3 145.8 0.8

EBITDA 141.8 141.8 156.3 -9.3 129.6 9.4

EBITDA Margin (%) 18.0 18.0 21.0 -301 bps 17.1 85 bps

EBITDA margins expanded 90 bps QoQ, above our 60 bps expansion

estimate mainly on account of increased digital and product business as well

as operational efficiencies

Depreciation & amortisation 30.5 30.5 27.9 9.3 31.1 -1.9

EBIT 111.3 111.3 128.4 -13.3 98.5 13.0

EBIT Margin (%) 14.1 14.1 17.2 -313 bps 13.0 109 bps

Other income (less interest) 14.8 14.8 4.4 236.4 0.5 2,860.0

Exceptional items 0.0 0.0 -14.0 NM 0.0 NM

PBT 126.1 126.1 132.8 -5.0 99.0 27.4

Tax paid 28.8 28.8 30.6 -5.9 16.3 76.7

PAT 86.1 86.1 109.0 -21.0 75.7 13.7

Reported profit was ahead of our estimates on account of a better-than-

expected operating performance

Key Metrics

Closing employees 9,423 9,000 8,853 6.4 9,081 3.8

Attrition (%) 10.5 11.5 12.7 -220 bps 10.6 -10 bps

Overall utilisation (%) 79.5 81.0 81.0 -150 bps 79.0 50 bps

Average $/| 64.6 64.7 67.4 -4.2 64.8 -0.4

Source: Company, ICICI Direct Research

Change in estimates

FY19E FY20E

(| Crore) Old New % Change Old New % Change Comments

Revenue 3,298 3,371 2.2 3,664 3,785 3.3

EBITDA 554 580 4.7 623 662 6.3

EBITDA Margin (%) 16.8 17.2 37 bps 17.0 17.5 47 bps

PAT 319 325 1.8 365 388 6.2

EPS (|) 52.2 52.9 1.3 59.8 63.2 5.6 We tweak our estimates owing to change in margin estimates


Assumptions

Current Current Earlier Current Earlier

FY17 FY18E FY19E FY19E FY20E FY20E

Closing employees 8,853 9,423 10,539 10,581 11,627 11,611

Attrition (%) 12.9 11.2 11.5 11.5 11.5 12.0

Overall utilisation (%) 80.5 79.8 79.8 80.0 81.0 81.0

Average $/| 67.1 64.5 65.0 65.0 65.0 65.0



Analyst Meet highlights…

We attended NIIT Technologies’ Analyst Meet wherein the management

detailed its changed ‘Agenda of Growth’ citing change which would drive

the growth, its impact and the roadmap ahead.

‘What’ is the change to drive growth- 1) The company has

reorganised itself as a vertical driven organisation from

geography driven with sales, pre-sales and delivery teams aligned

for the industry verticals of BFSI and travel & transport, 2) post

appointment of Sudhir Singh as CEO of the company, various

transitions have been made to the leadership team with addition

in key positions in banking & financials and insurance vertical,

cloud technology team and creation of CTO office to drive

emerging technologies, 3) change in incentive and compensation

structure with increase in large deal bonus payouts and

compensation increments related with increased differentiation

and spread and 4) tweaking in internal processes

‘How’ it impacts the company- The management has undertaken

a restructuring exercise to drive growth through changes in the

leadership team, reorganising itself as a vertical driven

organisation and modifications in incentive structure. These

changes are visible in NTL key metrics such as Order intake:

improved from $110 million in Q1 to $145 million in Q4FY18;

Number of $ mn clients increased from 72 in Q1FY18 to 80 in

Q4FY18; traction in large deal momentum (H1:2, H2FY18:5

deals); Digital contribution as % of revenues inching up from 21%

in Q1FY18 to 26% in Q4FY18 and Top 5 clients concentration

reducing from 33% in Q1 to 29% in Q4FY18. Going ahead, the

management remains positive of winning at least seven large

deals in FY19E.

‘Where’ from here: The road ahead – NTL’s strategy is to engage

with the Emerging by innovate, incubate and industrialise.

Innovate by leveraging emerging technologies to drive

transformation, Incubate by focusing on digital at scale and

industrialize through automation creating impact on businesses

Revenue outlook: Revenues in constant currency grew 4.3% QoQ

in Q4FY18. For Q1FY19E, the management expects CC revenue

growth to be better compared to Q4FY18, despite the weak

seasonality in the GIS business and ramp down in Morris. The

strong outlook for the next quarter is on the back of healthy

momentum in the past three quarters and deal closures. For

FY19E, the management expects double digit growth in revenue

on an organic basis in CC terms owing to a healthy order book

attained in FY18 and deal win momentum


Company Analysis

Exhibit 1: Geography-wise break up

Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18

Revenue by geography (%)

America 48.0 48.0 49.0 50.0 50.0 48.0

EMEA 34.0 33.0 32.0 29.0 30.0 32.0

RoW 18.0 19.0 19.0 21.0 20.0 20.0

Growth QoQ (%)

America -2.5 7.6 1.5 6.6 1.7 0.5

EMEA 2.6 4.4 -3.6 -5.4 5.2 11.7

RoW -0.4 13.6 -0.6 15.4 -3.2 4.7


Exhibit 2: Vertical-wise break up


Revenue by verticals (%)

Banking & financial services 18.0 18.0 17.0 17.0 17.0 16.0

Insurance 24.0 24.0 25.0 25.0 26.0 28.0

Transport 32.0 31.0 29.0 27.0 27.0 26.0

Manfacturing, Med & Others 26.0 27.0 27.0 29.0 27.0 29.0

Government 2.0 2.0 2.0 2.0 3.0 1.0

Growth QoQ (%)

Banking & financial services -5.7 7.6 -6.1 4.4 1.7 -1.4

Insurance 3.9 7.6 3.6 4.4 5.7 12.8

Transport -3.4 4.2 -7.0 -2.8 1.7 0.9

Manfacturing, Med & Others 3.6 11.7 -0.6 12.2 -5.3 12.5

Government NA 0.1 0.0 0.0 0.5 -0.7


EMEA led the quarterly growth with strong 11.7%

growth on a QoQ basis on account of growth in the NITL

business. This was followed by RoW, which grew on

the back of growth in the GIS business and growth in

the APAC region

BFSI grew 7.2% QoQ driven by growth in the insurance

segment

Travel & transportation was flat sequentially owing to a

delay in start of new projects


Exhibit 3: Service mix break up


Revenue by service mix (%)

SI & PI 4.0 6.0 5.0 6.0 5.0 4.0

IP Assets 7.0 6.0 6.0 7.0 7.0 7.0

Managed Services 17.0 17.0 18.0 18.0 19.0 19.0

Application Development & Management 67.0 66.0 66.0 64.0 65.0 66.0

BPO 5.0 5.0 5.0 4.0 4.0 4.0

Growth QoQ (%)

SI & PI 32.8 61.4 -17.1 25.3 -15.3 -16.2

IP Assets -0.4 -7.8 -0.6 21.8 1.7 4.7

Managed Services -0.4 7.6 5.3 4.4 7.3 4.7

Application Development & Management -1.9 6.0 -0.6 1.3 3.3 6.3

BPO -0.4 7.6 -0.6 -16.5 1.7 4.7


Exhibit 4: Client & human resource matrix


Client metrics

Between 1 to 5 million 55 55 52 55 59 60

Between 5 to 10 million 10 10 14 13 12 13

Above 10 million 8 8 6 6 7 7

Headcount, Utilization, Attrition

Total Employees 8809 8853 8,963 9,022 9,081 9,423

Utilization 80.0 81.0 81.2 79.5 79 79.5

Attrition 12.6 12.7 12.1 11.4 10.6 10.5


Growth in digital engagements led the growth for ADM

Attrition rate continues its declining spree since Q4FY17

and declined 10 bps QoQ to 10.5% in the quarter


Financial story in charts

Exhibit 5: Digital contribution as a percentage of overall revenues continues to inch up

18.0%19.0% 19.0%

21.0% 21.0%

23.0%

25.0%26.0%

10.0%8.8%

-0.4%

18.9%

-0.6%

14.0%

11.0%

8.9%

-2.0%

8.0%

18.0%

28.0%

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

%

Digital as a % of revenue Growth, QoQ

Exhibit 6: Dollar revenues may grow at 12.1% CAGR during FY18-20E

388

100 103 103 111

416

110 115 117

464

519

582

411

122

1.3

9.8 11.3

1.1

6.0

-1.1 -1.5 -0.7

8.6

13.610.6 11.3 11.9 12.3

0

100

200

300

400

500

600

FY15

FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

FY18E

FY19E

FY20E

$ m

illion

-20

-10

0

10

20

30

40

50

%

Dollar revenue Growth, YoY



Exhibit 7: EBITDA margin expands 90 bps QoQ to 18%

14.6

17.3

15.3

16.216.9

21.0

17.3

15.616.1

17.1

18.0

16.817.2

17.5

10

13

16

19

22

FY15

FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

FY18E

FY19E

FY20E

%

EBITDA margin


Exhibit 8: PAT expected to grow at 17.6% CAGR in FY18-20E

193.8

264.35

31.3

59.6 65.4

109

250.1

51.367.1

75.786.1

280.2

324.6

387.7

0

100

200

300

400

FY15

FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

FY18E

FY19E

FY20E

| c

rore

PAT



Outlook and Valuation


than-expected operating performance. Among verticals, BFSI witnessed

growth of 5.4% QoQ owing to a ramp up in top accounts. Also, Digital

revenues grew 9% QoQ contributing 26% to total revenues in Q4FY18.


than-expected operating performance. The commentary on the outlook is

positive with the strong order intake. Hence, we tweak our estimates and

now anticipate rupee revenue and PAT to grow at a CAGR 12.5% and

17.6%, respectively, in FY18-20E. However, after the sharp run up in the

last six months, the stock now captures the growth potential leaving

limited upside at the current level. Hence, we maintain our HOLD rating

on the stock with a revised target price of | 1075 (17x FY20E EPS).

Exhibit 9: One year forward rolling PE

0

200

400

600

800

1000

1200

May-0

8

Nov-0

8

May-0

9

Nov-0

9

May-1

0

Nov-1

0

May-1

1

Nov-1

1

May-1

2

Nov-1

2

May-1

3

Nov-1

3

May-1

4

Nov-1

4

May-1

5

Nov-1

5

May-1

6

Nov-1

6

May-1

7

Nov-1

7

May-1

8

Price 15 12 9 6 3


Exhibit 10: Valuations

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE

(| cr) (%) (|) (%) (x) (x) (%) (%)

FY16 2,682 13.1 43.3 36.2 24.1 7.2 16.8 24.3

FY17 2,802 4.5 40.8 (5.7) 23.4 6.3 14.8 29.8

FY18E 2,991 6.8 45.6 11.9 23.0 5.6 15.1 32.8

FY19E 3,371 12.7 52.9 15.8 19.8 4.4 15.4 38.1

FY20E 3,785 12.3 63.2 19.5 16.6 3.3 16.1 44.7



Recommendation History vs. Consensus

100

300

500

700

900

1,100

May-

18

Mar-

18

Feb-

18

Dec-

17

Nov-

17

Sep-

17

Jul-

17

Jun-

17

Apr-

17

Mar-

17

Jan-

17

Dec-

16

Oct-

16

Sep-

16

Jul-

16

Jun-

16

Apr-

16

Feb-

16

Jan-

16

Nov-

15

Oct-

15

Aug-

15

Jul-

15

May-

15

Apr-

15

(|

)

0.0

20.0

40.0

60.0

80.0

100.0

(%

)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICI Direct Research

Key events

Date Event

Apr-15 Acquires 51% stake in Incessant Technologies for ~$17 million. The company could generate $17 million revenues with 20%+ margins in FY15E.

Jul-15 Reports healthy revenue growth in services segment led by Incessant and international business partially offset by decline in domestic revenues (PFR)

Oct-15 Reports Q2FY16 earnings with 3.5% QoQ growth, in line with estimates, led by BFSI, transportation and manufacturing, while at 17.6%, margins were better

Feb-16 NIIT Tech launches intelligent automation for business operations,by partnering with a software company UiPath, specialized in Robotic process Automation

Mar-16 Secures best service provider award from ICT subsidiary of German railways

Jan-17

According to media article, NIIT Technologies appoints Joel Lindsey as global head of digital services. NITL also appoints Adrian morgan as head of NIIT Insurance

Technologies

Apr-17

Implements settlement agreement with the government and receives part payment of | 41.9 crore, with revenue recognition of | 27.1 crore for services contracted

and reversal of provisions of | 13.15 crore to be accounted in FY17

Mar-16 Secures best service provider award from ICT subsidiary of German railways

May-17

Partners with an artificial intelligence and autonomous automation firm 'Arago'. NIIT would integrate Arago’s general AI technology HIRO into its automation offering,

TRON Smart Automation. This partnership could enable company to deliver a superior automation experience by bringing in cutting-edge machine reasoning

technology optimised by machine learning

Jun-17

NIIT Technologies subsidiary Incessant Technologies signs a definitive agreement to acquire a 55% stake in US-based business process management firm RuleTek

LLC. This acquisition could help Incessant expand its footprint in North America and strengthen its digital integration capabilities. RuleTek has 65 employees and

reported revenues of $6.47 million for FY17


Top 10 Shareholders Shareholding Pattern

Rank Name Latest Filing Date % O/S Position (m) Change (m)

1 Scantech Evaluation Services, Ltd. 31-Dec-17 23.6% 14.5 0.0

2 HDFC Asset Management Co., Ltd. 31-Dec-17 9.0% 5.5 -0.1

3 UTI Asset Management Co. Ltd. 31-Dec-17 4.5% 2.8 0.0

4 GSPL Advisory Services & Investment Pvt. Ltd. 31-Dec-17 3.5% 2.2 0.0

5 PIPL Business Advisors & Investment Pvt. Ltd. 31-Dec-17 3.5% 2.2 0.0

6 Brandes Investment Partners, L.P. 31-Dec-17 3.3% 2.0 -2.2

7 Dimensional Fund Advisors, L.P. 31-Mar-18 2.6% 1.6 0.0

8 Polaris Capital Management, LLC 31-Dec-17 2.3% 1.4 0.7

9 Grantham Mayo Van Otterloo & Co LLC 30-Nov-17 1.8% 1.1 -0.2

10 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-Mar-17 1.8% 1.1 0.4

(in %) Sep-17 Dec-17 Mar-18

Promoter 30.68 30.68 30.67

Public 69.32 69.32 69.33

Others 0.00 0.00 0.00

Total 100.00 100.00 100.00

Source: Reuters, ICICI Direct Research

Recent Activity

Investor name Value Shares Investor name Value Shares

Polaris Capital Management, LLC 7.2m 0.7m Brandes Investment Partners, L.P. -22.2m -2.2m

Union Investment Luxembourg S.A. 4.8m 0.5m FIL Investment Management (Singapore) Ltd. -4.1m -0.3m

Goldman Sachs Asset Management (India) Private Ltd. 3.6m 0.4m Grantham Mayo Van Otterloo & Co LLC -2.5m -0.2m

William Blair Investment Management, LLC 3.5m 0.3m IDFC Asset Management Company Private Limited -2.5m -0.2m

Goldman Sachs Asset Management International 3.0m 0.2m Kotak Mahindra Asset Management Company Ltd. -2.2m -0.2m

Buys Sells

Source: Reuters, ICICI Direct Research


.

Financial summary

Profit and loss statement | Crore

1


Total operating Income 2,802 2,991 3,371 3,785

Growth (%) 4 7 13 12

COGS (employee expenses) 1,790 1,918 2,158 2,411

S,G&A expenses 527 572 634 712

Total Operating Expenditure 2,318 2,490 2,791 3,123

EBITDA 485 501 580 662

Growth (%) 4 3 16 14

Depreciation 128 127 143 161

Other Income 16 30 33 50

PBT 373 404 470 552

Total Tax 79 95 115 132

Adjusted 'PAT 250 280 325 388

Growth (%) (5) 12 16 19

Adjusted EPS (|) 40.8 45.6 52.9 63.2

Exceptional loss 22 - - -

Reported PAT 228 280 325 388

Reported EPS (|) 40.8 45.6 52.9 63.2

Growth (%) (5.7) 11.9 15.8 19.5


Cash flow statement | Crore


Profit before Tax 373 404 470 552

Add: Depreciation 128 127 143 161

(Inc)/dec in Current Assets 88 (52) (104) (113)

Inc/(dec) in CL and Provisions - 35 64 70

Taxes paid (105) (95) (115) (132)

CF from operating activities 494 389 426 487

(Inc)/dec in Investments (652) - - -

(Inc)/dec in Fixed Assets (87) (93) (105) (118)

Others 7 30 33 50

CF from investing activities (306) (63) (72) (68)

Issue/(Buy back) of Equity 7 - - -

Inc/(dec) in loan funds 1 (2) (2) (2)

Dividend paid & dividend tax (74) (108) (79) (79)

CF from financing activities (67) (110) (81) (81)

Net Cash flow 99 216 273 338

Exchange difference (37) 2 2 2

Opening Cash 336 408 626 900

Closing Cash 408 626 900 1,241


Balance sheet | Crore

(Year-end March) FY17 FY18E FY19E FY20E

Liabilities

Equity Capital 61 61 61 61

Reserve and Surplus 1,625 1,798 2,043 2,352

Total Shareholders funds 1,687 1,859 2,105 2,413

Total Debt 7 7 7 7

Provisions 27 27 27 27

Minority Interest / Other non CL 271 300 330 361

Total Liabilities 1,992 2,193 2,468 2,809

Assets

Net Block 663 629 590 547

Capital WIP - - - -

Total Fixed Assets 663 629 590 547

Goodwill 185 185 185 185

Deferred tax assets 97 97 97 97

Debtors 490 523 590 662

Other Current Assets 274 292 329 370

Cash 408 626 900 1,241

Current Investments 316 316 316 316

Total Current Assets 1,488 1,757 2,135 2,589

Trade payables 138 150 169 189

Other current liabities 295 315 355 399

Short term provisions 40 43 48 54

Total Current Liabilities 473 507 572 642

Net Current Assets 1,015 1,250 1,564 1,947

Application of Funds 1,992 2,193 2,468 2,809


Key ratios

(Year-end March) FY17 FY18E FY19E FY20E

Per share data (|)

Adjusted EPS (Diluted) 40.8 45.6 52.9 63.2

DPS 12.5 15.0 11.0 11.0

Cash per Share 72.9 101.9 146.6 202.0

BV per share (Diluted) 301.8 302.8 342.8 393.0

Operating Ratios (%)

EBITDA Margin 17.3 16.8 17.2 17.5

PBT Margin 13.3 13.5 13.9 14.6

PAT Margin 8.9 9.4 9.6 10.2

Debtor days 13 12 11 9

Creditor days 18 18 18 18

Return Ratios (%)

RoE 14.8 15.1 15.4 16.1

RoCE 29.8 32.8 38.1 44.7

RoIC 26.1 27.7 32.3 48.5

Valuation Ratios (x)

P/E (Adjusted) 23.4 23.0 19.8 16.6

EV / EBITDA 6.3 5.6 4.4 3.3

EV / Net Sales 1.1 0.9 0.8 0.6

Market Cap / Sales 1.3 1.3 1.1 1.0

Price to Book Value 3.5 3.5 3.1 2.7

Solvency Ratios

Debt/EBITDA 0.0 0.0 0.0 0.0

Debt / Equity 0.0 0.0 0.0 0.0

Current Ratio 2.5 2.4 2.3 1.8

Quick Ratio 1.8 1.8 1.8 1.8



ICICI Direct Research coverage universe (IT)

CMP M Cap

(|) TP(|) Rating (| Cr) FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E

Cyient (INFENT) 835 870 Hold 9,401 30.5 36.0 40.0 27.3 23.2 20.9 17.7 14.7 12.9 19.7 22.0 20.8 16.2 17.1 17.1

Eclerx (ECLSER) 1,270 1,220 Sell 5,236 86.4 73.9 79.7 14.7 17.2 15.9 9.9 11.9 11.0 34.5 26.9 26.5 29.1 21.4 21.1

Firstsource (FIRSOU) 64 87 Buy 4,490 4.1 4.8 5.1 15.7 13.5 12.5 11.9 10.7 9.2 11.7 12.7 14.7 13.8 13.9 13.6

HCL Tech (HCLTEC) 950 1,000 Hold 134,111 60.0 62.6 64.9 15.8 15.2 14.6 12.8 11.1 9.4 29.0 27.3 26.7 25.3 23.8 21.7

Infosys (INFTEC) 1,167 1,180 Hold 266,721 62.8 71.0 67.5 18.6 16.4 17.3 12.8 13.0 12.1 28.8 33.3 31.3 20.8 26.4 22.2

KPIT Tech (KPISYS) 231 200 Hold 4,596 10.6 12.1 13.6 21.7 19.1 16.9 12.8 12.0 10.3 14.5 15.8 16.4 15.1 13.6 13.6

Mindtree (MINCON) 890 830 Hold 14,945 24.9 34.3 39.5 35.7 26.0 22.5 20.2 19.1 13.9 21.2 27.5 28.5 16.2 21.7 21.3

NIIT Technologies (NIITEC) 1,049 1,075 Hold 3,758 40.8 45.6 52.9 23.4 23.0 19.8 6.3 5.6 4.4 29.8 32.8 38.1 14.8 15.1 15.4

Persistent (PSYS) 750 825 Buy 5,999 37.6 40.5 44.7 20.0 18.5 16.8 11.9 11.4 9.5 20.8 19.9 19.5 15.9 15.2 15.0

TCS (TCS) 3,378 3,260 Hold 661,649 133.4 135.5 145.5 25.3 24.9 23.2 19.1 18.9 16.6 38.0 38.3 35.2 29.8 29.9 27.3

Tech Mahindra (TECMAH) 666 630 Hold 65,448 31.7 38.4 39.6 21.0 17.3 16.8 14.6 12.9 10.7 19.4 20.0 18.6 17.1 18.1 16.4

Wipro (WIPRO) 278 315 Buy 137,249 17.5 17.7 18.3 15.9 15.7 15.2 10.1 11.5 10.5 16.8 16.8 15.5 16.3 16.7 15.0

Sector / Company

RoE(%)RoCE (%)EV/EBITDA (x)P/E (x)EPS (|)



RATING RATIONALE

ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its

stocks according to their notional target price vs. current market price and then categorises them as Strong

Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is

defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;

Buy: >10%/15% for large caps/midcaps, respectively;

Hold: Up to +/-10%;

Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]


ANALYST CERTIFICATION

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