NIIT Ltd – Valuation “compellingly attractive” (60% upside) by Centrum
We reiterate Buy on NIIT Ltd with a new TP of Rs67 based on a Sum-of-parts valuation with Sep-16E estimates. We think valuations have again become compellingly attractive with the recent decline in stock price (after 1QFY15 results did not meet the high expectations despite EBITDA being up 29.9% YoY). Even without factoring in a sharp recovery in ILS, we find significant upside is possible for the valuation of the core business. With over 70% of current EV being accounted for by the holding in NIIT Technologies, we think that NIIT Ltd’s high-growth business in Corporate Learning Services is undervalued while its ILS recovery can add further upside to our target price.
HIL Ltd – V shaped recovery in sight (25% upside) By IndiaNivesh
With the increasing thrust on rural development and rural housing, rising income of rural India and reducing gap in between cement fibre sheets and alternative products, we expect the fibre cement sheet industry to grow at a CAGR of 5% over the next two years. The company strategy of diversifying into non-asbestos products is likely to drive the growth and reduce its dependence on chrysotile (key raw material). We are positive on the company strategy of establishing itself as a one stop building solutions provider. We expect the company to grow at a CAGR of 26.4% over FY14-FY16E with 794 bps improvement in EBITDA margin. The expected ROE of 23.2% in FY16E provides additional comfort in improving financial performance.
At CMP of Rs 576, the stock trades at PE of 7.7x and 4.2x its FY15E and FY16E earnings of Rs 75.2 and Rs 136 per share respectively. Comparing this with its peers (though not strictly comparable due to presence of other businesses), the stock appears to be attractively valued. Historically, it has traded at one year forward PE of 6.6x over the last 7 years. We value the stock at 5.3x PE (i.e. 20% discount to its historical PE) of its FY16E earnings, to arrive at target price of Rs 721.