PINC Research has maintained buy rating on NIIT Technolgies Ltd stock with a price target of Rs 278 in its report dated Dec 15, 2010.

NIIT Tech has large exposure to high-growth niche verticals such as insurance and travel. New service lines would boost non-linear growth and lead to improvement in realizations. NIIT Tech has no exposure to the PIIGS zone and it has been able to achieve volume growth in Europe despite economic headwinds.

What will move the stock?

1) Recent wins in the Indian market: Five-year BSF contract of Rs2,280mn;
2) Good performance in the Insurance and travel and transport verticals, which contribute ~72% to revenue;
3) Large untapped opportunity in the APAC markets, which are expected to be highest IT spenders in CY10;
4) Strong order book and high growth in top 10 clients; and
5) Stable EBIDTA margins in the IT services business.

The report said that the company's top-line estimates vary from consensus by ~5.3%, underpinned by stronger volumes and modest uptick in pricing for FY12. Our EBITDA margin estimate for FY12 is 20.6% which is in line with consensus.

Their FY12 EPS estimate is 4.3% higher than consensus.

Slower recovery in Europe; sharp currency volatility; higher attrition and wage increments; and project delays and cancellation of government contracts will challenge the target price of the company.