NINtec Systems Limited: A High Potential Microcap IT Company

[santoshbadal1111]

NINtec Systems Limited

Introduction

NINtec Systems Limited, headquartered in Ahmedabad, India. With a market cap of ₹925 Cr., this microcap company is poised for substantial growth, focusing on advanced technologies such as artificial intelligence (AI), machine learning (ML), blockchain and cybersecurity.

Company Overview

Founded: 2015
Listing: Main boards of BSE and NSE (since February 2023)
Global Presence: Headquarters in Ahmedabad, India and a subsidiary in the Netherlands
Customer Base: Serving Fortune 500 companies and SMEs across 18 industry verticals, including automotive, gaming, healthcare and fintech
Revenue Source: 95% from overseas customers

Services Offered:

• Business Analytics
• Cloud Services
• Application Engineering
• Testing Services
• Application Development & Maintenance
• Off/On-shore Software Product Development
• Legacy System Development & Software Migration
• Search Engine Optimization
• Multimedia design & development
• Web designing

User Industries:

• Automotive
• Print Media & Publishing
• BFSI
• Transportation & Logistics

Area of Expertise:

• .Net Development
• Game Development
• PHP Development
• ERP
• Wireless, Mobile, WAP Development

International Presence: Serving customers across 30 countries in 5 continents, with a strong presence in European markets, mainly Benelux countries.

Financial Performance and Growth Prospects

Revenue and EBITDA Growth:

• Q4 revenue year-on-year growth of 177.9%, with a 190.5% increase in EBITDA for the same period.
• Full-year EBITDA grew by 172% year-on-year.

Margin Stability:

• Margins are expected to remain strong due to favorable exchange rates, productivity improvements, and reusable components and tools.

Order Book and Pipeline:

• Robust pipeline with 95% of revenue from overseas customers. The Netherlands subsidiary plays a key role in securing large deals.

Revenue Breakdown:

• FY22 revenue: 79% from Software Export Income, 18% from Domestic Sales, and 3% from Other Income.

Cybersecurity Initiatives:

• Setting up Security Operations Centers (SOCs) in India and the Netherlands for real-time monitoring and response to security incidents.

Expansion Plans:

• Focus on export markets, leveraging presence in the Nordics, Benelux, UK, and North America.

Key Highlights and Future Outlook

Focus on Cybersecurity:

• Investing in cybersecurity, establishing SOCs in India and the Netherlands to enhance service offerings.

Global Expansion:

• The Netherlands subsidiary enhances access to European markets, facilitating larger multi-year deals and higher billing rates.

Strong Financial Position:

• Clean balance sheet with significant cash reserves and a low debt-to-equity ratio of 0.07.

Commitment to Talent:

• Heavy investment in attracting and retaining top talent to stay competitive in AI, ML, and cybersecurity.

Promoter Overview:

• Niraj Gemawat, founder and CEO, with over 27 years of experience, leading the company’s growth and innovation.

Challenges and Risks

Market Dependencies:

• Heavy reliance on non-English speaking markets poses risks related to geopolitical and economic fluctuations.

Talent Acquisition and Retention:

• Constant need for acquiring and retaining skilled professionals in a competitive industry.

Cybersecurity Landscape:

• The evolving cybersecurity landscape requires continuous adaptation and investment in research and development.

Investment Perspective

NINtec Systems is a growth-oriented company with a solid track record of delivering exceptional shareholder returns. Its focus on high-value, complex engineering services, particularly in the growing cybersecurity space, presents substantial growth opportunities. While global market volatility remains a key risk, the company’s strong financial position and commitment to talent development provide a solid foundation for future success.

Shareholding

[anishc]

How did you get the Best Case and Worst Case scenarios in Screener?

[binay1702]

Company Journey from 2015 to till now is very impressive. The company management has first time given concall which is positive sign for investors.
Disc: Invested

[Shakti_Srivastava]

The only concern with this stock is it’s very expensive valuations.

[HarshVijay]

I believe it’ll be a multibagger! high chances… promoters continuously have bough in the month of march and Apr, if I remember correctly. The company has a very diversified clientele base (Very less dependent on US, unlike most other IT companies) and very healthy growth rates guided by the promoters in the comin years…

[jonty_lopes]

Please anyone can clear these queries and provide answers to these questions:

1. Can anyone provide the names of Fortune 500 companies (clients) this company offers it’s services to?
2. Also what are the use cases of this company, it difficult to find as they have only mentioned buz words and tech stacks.
3. How is Nintec (Netherlands based), Nintec Systems (India) and Gateway Digital related. What is the company structure. Is Nintec the parent company?

[HarshVijay]

For the 2nd question, all the use cases are mentioned on their website… please refer the ‘services’ section.

For the 3rd Question, the exact structure and relationships between these companies are not entirely transparent, but here’s what is known:

1. NINtec Systems Ltd. (India): This company is the core IT services provider within the group, offering a range of technology solutions including application development, cloud services, and business analytics. It primarily serves international clients, particularly in Europe and the U.S.
2. NINtec B.V. (Netherlands): This entity is likely a subsidiary or sister company of NINtec Systems Ltd. and plays a critical role in managing and expanding the company’s operations in Europe. The Netherlands-based company might focus more on client engagement and delivery in the European market, leveraging the technical expertise and services developed in India.
3. Gateway Digital: Gateway Digital seems to operate as a related entity within the same corporate group. It specializes in digital transformation services, which could include more strategic and consulting-oriented offerings compared to the primarily technical services of NINtec Systems. Gateway Digital likely complements NINtec’s offerings, targeting a slightly different or overlapping market segment.

The companies appear to share common ownership or management, functioning as part of a global network. This structure allows them to tap into different markets with localized offerings while maintaining a strong global presence. However, the exact ownership hierarchy (whether NINtec Systems Ltd. is the parent company or if there is a holding company structure above them) is not clearly documented in publicly available sources. I am assuming most probably they are trying to build synergistic relationships between all the sub-entities to offer wider range of services…

Let me know your thoughts too

[HarshVijay]

Also attaching the concall notes by screener for reference:

[Mahigiri21]

Do they have any MOAT or differentiation factor vis-a-vis other companies? And are there any strong revenue drivers?

[hamir_asher]

which portion of their portfolio is into AI / ML, what they have mentioned is pretty standard stuff which all IT companies claim to do. Agree with the query, what is the differentiation factor. Just by putting AI / ML on websites is not enough. Even the largest IT companies in the world are yet to get a good product / service on AI which can be rolled out to industry.

[kkbhatt]

Some observations:

• After going through their concalls and website, it looks like they are not focused on innovation. They seem to be a regular IT services company rather than investing in AI/ML research. Being an Software developer I could understand that. At the most they are trying to train their engineers in AI/ML fields so that they can grab opportunities to maintain future AI/ML products. As per LinkedIn and other websites, they are hiring average IT engineers in India. This also suggests they are not prioritizing R&D in AI/ML, which usually requires highly skilled talent.
• Their main focus is on Nordic markets, where profit margins are high. Nordic markets are also stable, which means they likely have long-term commitments from clients.
• The founder has already built similar companies in the Netherlands and is now trying to establish a new company in India. Founders and primary shareholders likely have good industry contacts, which helps them win contracts. If related companies has got clients overseas, it would be very easy to onboard same clients to NinTec.
• In IT services, reusing developed systems helps increase profit margins. Once a system is built, it can be used for multiple clients, making the business more profitable.
• Since they are a small company right now, there is a lot of room for growth. If they have got focus and contacts, they should be able to get ten times more orders than they currently have.
• The connection between this company and the founder’s other firm is not clear. The Gateway Group already has many subsidiaries offering different IT solutions, so it is unclear why the founder started a separate company instead of just opening an office under the existing structure.
• If founders are focused in India, scaling up should not be difficult. Even though they are not working on new innovations, their strong presence in stable Nordic markets and industry connections make growth likely.

[santoshbadal1111]

Its because of my screener smart analyzer google chrome extension
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