Kotak Securities has given a buy rating on NIIT Technologies with a target price of Rs 299.

NIITT's operating results for fourth quarter of FY12 were broadly in line with estimates. Volumes (excluding hardware revenues) grew by about 4 per cent quarter on quarter (3 per cent in third quarter).

The volume growth was likely impacted by seasonality and also due to the subdued growth in the Insurance vertical. Margins fell on a quarter on quarter basis due to the forex impact and also due to softness in the high-margin insurance vertical.

Morris revenues are still not bringing in any margins, we understand. This volume growth follows nine successive quarter of high volume growth for the company. Average realisations remained stable. The company had a translation loss of Rs 7.1 million during the quarter (gain of Rs 164 million in 3Q).

Non-linear revenues (including Morris) formed about 30 per cent (30 per cent in 3Q) of revenues. The order bookings were at an encouraging $92mn ($75mn in 3Q). Orders executable over 12 months are 44 per cent higher at the fiscal end v/s the previous year. On the macro front, the management has indicated challenges, but expects the order book to help sustain decent revenue growth.

The company is chasing four large deals worth more than $25mn each. All targets are outside the existing client set for NIITT. We have tweaked our FY13E estimates. "Our FY13E EPS stands at Rs 37 (Rs 39.1 earlier). Our DCF - based price target stands almost unchanged at Rs 299 (Rs 300 earlier), based on FY13 earnings. At our TP, our FY13 earnings will be discounted by about 8x which, we believe, is undemanding. We maintain buy. NIITT has been achieving consisting revenue growth and margins over the past few quarters," the brokerage said.

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