Buy NIIT: Target Rs 187
HDFC Securities has recommended buy rating on NIIT in its December 26, 2007 report. “We have valued NIIT using the PEG ratio of 0.6x on its FY09E earnings, after discounting our base case EPS for INR related risks, increasing concerns of corporates training their employees internally and the Individual IT training business’s dependence on the growth of IT/ITES industry. We believe its focused approach, a lack of talent in India and the strong growth in Financial, Insurance and IT services, will lead to a huge demand for NIIT Solutions. The stock is currently trading at 20x and 14x its FY09E and FY10E earnings. The stock has traded in the range of one year forward multiple of 29x and 13x. We believe the stock in the past one-year has been constantly re-rated with increasing visibility of Individual training, newer business initiatives and cordial Element K integration. We have initiated a BUY rating on stock with a target of Rs 187, an upside of 34%, with target PE of 26x on its FY09E earnings. We expect NIIT to grow at 44% CAGR in FY07-10E due to the turnaround of Element K post acquisition and stronger growth in newer businesses, ” says HDFC Securities research report.
