NIIT share price surges about 56% in September so far; should you buy? Here's what experts say
4 min read 15 Sep 2023, 01:00 PM ISTNIIT's share price surged 56 per cent in September, outperforming the Sensex, after three months of losses. Analysts advise caution, with indicators at highly overbought levels and potential profit booking.
PremiumThe performance of NIIT's share price in September has been nothing short of astonishing, with a remarkable surge of 56 per cent while equity benchmark Sensex has gained about 5 per cent in September so far. On a monthly scale, the stock is in the green after three consecutive months of losses. In June this year, the stock cracked nearly 79 per cent, followed by modest declines of 2 per cent each in both July and August.
This stock has been extremely volatile over the last year. Over the past three months, the stock has demonstrated a remarkable surge, registering a gain of 44 per cent. However, when assessing its performance over a slightly longer horizon of six months, the stock reveals a starkly different trend, with a notable decline of over 64 per cent during that period.
On Friday, the stock plunged 5 per cent on BSE. In the previous session on Thursday, the stock ended with a loss of 6.62 per cent.
Mint talked to fundamental and technical experts to understand what is the road ahead for the stock and what should investors do with it. Here's what they said.
Fundamental views
Shivani Nyati, Head of Wealth, Swastika Investmart
NIIT Ltd., an ed-tech company, has recently experienced a price surge in the market. The stock performance is a reflection of the company's recent demerger, innovative expansion, introduction of fresh business models, and engagement of students in exciting new training and enrollment approaches for NIIT courses.
NIIT acquired the remaining 10 per cent stake in RPS Consulting, making it a fully owned subsidiary of NIIT. Management has provided guidance that the company is emerging from a negative growth cycle, with expectations of sustained growth throughout the year.
Dhruv Mudaraddi, Research Analyst, StoxBox
NIIT shares have seen a sharp run-up in the last few days after the Chairman and Founder, Rajendra Singh Pawar, reiterated the future prospects and plans of the company to expand into new sectors (focused on AI) where India will seek large-scale talent in the near future.
The company has also set an ambitious target revenue of ₹1,200 crore by FY27-28. The confidence stems from the belief that the IT sector which is poised to grow strongly has its focus on reskilling as a critical priority and NIIT is well-positioned to absorb the benefits and expand its business into emerging sectors through organic as well as inorganic growth.
The company has cash reserves of ₹700 crore, which it has earmarked for potential mergers and acquisitions. However, at the current price levels, the analyst believes that it would be prudent to be on the sidelines as most of the positives are already priced in and one should await execution from the company side and keep a close eye on the IT sector hiring trends for making a further investment decision.
CA Vatsal Vinchhi, Equity Analyst - IT sector, Choice Equity Broking
NIIT underwent a demerger from NLSL last quarter. Q1FY24 revenue increased by 4 per cent year-on-year (YoY) aided by contributions from early career segments. It expects a strong ramp-up in Q2 and aims to achieve a positive EBITDA margin by the end of FY24E.
The company is investing in products to equip people with AI (artificial intelligence) skills which will enhance their productivity and have a positive impact on IT jobs.
It is also exploring opportunities in supply chain management and new manufacturing services. Management is aiming to achieve revenue of ₹1200 crore (organically and inorganically) and stabilize EBITDA margins at 15-20 per cent by FY27E-28E.
"The stock ramped up recently due to huge trading volumes. I believe the company is poised for growth and investors should stay invested for medium to long term and keep buying on dips depending on the company's performance as targeted," said Vinchhi.
Technical views
Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher
The stock has zoomed within a short span of time and has just moved above the previous peak of ₹150 which was the resistance. The indicators are at their highly overbought zone and the chances of some profit booking cannot be ruled out.
"The near-term support would be at around the ₹128-130 zone and further, a decisive breach above the ₹154 level can confirm a further fresh upside move," said Parekh.
Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers
This counter is trading near its historical top of ₹149 level, and all major exponential averages are way below the current price action.
"As we advance, we may see some profit booking. On the indicator front, monthly stochastics are still not overbought, which is not a good sign near the historical top. One should book profits immediately. Avoid fresh longs," said Patel.
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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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