Buy NIIT, Target 107

Buy NIIT with target price of Rs 107. Going ahead, we expect NIIT to clock a CAGR of 19.8% and 29.4% in Top-line and Bottom-line respectively, over FY2008-10E. We expect Top-line growth to be driven by the ILS Business, which is expected to grow at a CAGR of around 37% over the same period, with ILS-IT expected to grow by 29.3% CAGR and ILS-FMT by a robust 98.4% CAGR. The SLS Business is expected to clock a CAGR growth of 28.7%, while the CLS Business is expected to clock a subdued 5.7% CAGR growth over the same period. We expect EBITDA Margins to rise by around 100bp annually led by operating leverage in the ILS Business, particularly ILS-FMT. At the CMP, the stock is trading at 11.7x FY2010E EPS. We have downgraded our EPS estimates for FY2009 and FY2010 by 12% and 13% respectively, on account of lowering our Top-line and Margin estimates for the CLS Business, which has recorded a below-par performance. t.