“For 4QFY2011, NIIT’s results were in line with our expectations on the revenue front but were disappointing on the operational front. Revenue growth was driven by all businesses, but operational performance was dented due to the SLS business, which posted a 1,557bp yoy dip in EBITDA margin. Consolidated revenue came in at Rs324cr, up 9.8% yoy. Revenue from ILS-IT, SLS and CLS businesses increased by 6.7%, 16.5% and 9.5% yoy to Rs122cr, Rs37cr and Rs153cr, respectively. Revenue from new business grew by 27.2% yoy to Rs11.7cr. Blended EBITDA margin declined by 362bp yoy to 12.5% due to margin decline in all its business segments. EBITDA margin decline in the SLS segment was extensive at 1,557bp yoy to 7.5%. EBITDA margin of the ILS and CLS business segments declined by 205bp and 226bp yoy to 22.6% and 7.9%, respectively.”
“The hiring environment in the Indian IT sector is strengthening, as indicated by Indian IT players such as Infosys and TCS aiming to collectively hire ~1,05,000 people in FY2012. Thus, we expect ILS to record strong growth of 14% yoy in FY2012, with strengthening of the hiring environment expected to result in return in demand for vocational courses. With developed economies such as the US returning to growth, we expect the discretionary spend related to training outsourcing, learning products and managed training services to turn robust and expect 7% yoy growth in the CLS business. At the CMP, the stock is trading at EV/EBITDA of 4.3x FY2013E EBITDA, but the stake in NIIT Technologies provides for strong upside. Hence, we recommend Buy on the stock with a target price of Rs 68,” says Angel Broking research report.
Shares held by Central Governments/State Governments
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Its products cater to the some of the largest global brands in the FMCG sector and find applications in skin care, hair care, oral care, body wash, sun care, household cleaners and fabric care segments. Few of the global customers are Beiersdorf, Ecolab, Henkel, Diversey, L’Oreal, Reckitt Benckiser and Unilever. While the domestic customers include Ayur, CavinKare, Dabur, Emami, ITC, Marico, Procter & Gamble Home Products Limited to name a few.
Unnathan shekhar, Gopalkrishnan Ramakrishnan, Shahsikant Rayappa Shanbhag and Sudhir Datarram Patil are the promoters of the company.
The company presently has three manufacturing units at Tarapur, two manufacturing units at Taloja, Maharashtra and one manufacturing unit in USA which is owned by the company’s 100% step-down subsidiary Maybrook Inc. The company has a R&D centre at Navi Mumbai to develop new products, technologies and applications for the Personal and Home Care industry. Galaxy has 18 patents in India and 10 patents in USA. In addition Galaxy has applied for 8 patents in India and 1 patent in Europe.
Financials
The company’s product portfolio can be segmented into three major groups - Organic Surface Active Agents (OSAA) covering four basic categories of surfactants (Anionics / Non-ionics / Cationics /Amphoteric); Fatty Alkanolamides and Fatty Acid Esters (FA / FAE) & Other Specialty Chemicals (Preservatives in cosmetics / Sunscreen actives / Mild Surfactants/Polymers /Proteins etc.)
The company derives major revenue from OSAA which contributes around 86% to the total sales while other specialty chemicals contribute around 10% to the total sales and Fatty Acids/ Fatty Acid Esters contribute 4.1%. The company has consistently maintained this revenue mix in the last three years.
The company derives 52% of the revenues from exports while the rest is from the domestic market. The major offshore markets are APAC with 12% share in the revenues, 16.1% from Americas and Europe and the remaining from the RoW.
The company’s total sales grew at a CAGR of 19% in the last five years to Rs 644 Cr in FY10 while PAT grew at a CAGR of 43% to Rs 36 Cr in FY10. In 9mFY11, the company posted total income of Rs 682 Cr with a PAT of Rs 43 Cr. The company’s EBITDA margin in the range of 12.5%-13% in the last three years with an average net margin of 6%
The company’s leverage at present is slightly on a higher side with a debt equity level of 1.2:1 which will fall to 0.9:1 inclusive of the additional debt of Rs 150 Cr required for capacity expansion. The company’s RoE was at 17% in FY10 which increased to 20% in 9mFY11 (not annualized) on the back of improvement in PAT.
Concerns
The company is dependent on few major customers. The company derived 66% of the revenues from the top ten customers in 9mFY11 which has come down from 70% in FY09 and 67% in FY10
Timely execution of projects will remain one of the major concerns for Galaxy
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