Reduce NIIT – Citi

NIIT reported revenue of Rs2.7bn (+33% yoy). EBITDA of Rs359m (+50% yoy). Higher taxes and depreciation, and lower equity income from NIIT Tech led to a net profit of Rs212 m (vs. estimate of Rs246m).

Individual business revenue grew 31% yoy (CIR est. 41%), while EBITDA margin of 23.8% was broadly in line. NIIT said that the price hike for career segment courses in non-metros was from Aug, vs. Jun for metros. Organic corporate business had slower revenue growth, while ElementK growth was in-line. The company introduced new courses for the insurance and financial planning segments; these businesses also saw EBITDA breakeven.

Weaker growth for the individual business and the stronger INR is affecting the corporate business.The sum of parts valuation for NIIT is as follows,

  • Core Training Business – Rs 100
  • ElemntK – Rs 16
  • NIIT Tech Stake – Rs 24
  • New Business Rs 5

NIIT is expected to report an EPS of Rs 5.67 and 8.33 for FY08 and FY09 respectively. Revised 12 month target price is Rs 145.