Arihant Capital has given Neutral recommendation for MindTree with a target price of Rs. 4684 in its research report issued on Jan 14, 2022

Arihant Capital’s research report on MindTree

MindTree has reported a decent set of numbers in Q3FY22, Revenue in-line, margin above estimate due to cost optimization. Constant Currency Revenue growth +33.7% YoY/4.7% QoQ to (Mn USD) 366 against our estimate of 369 (Mn USD). MindTree has reported consolidated revenue of INR 27,500 Mn, +36% YoY/6% QoQ in Q3FY22 against our estimate of INR 27,765 Mn, higher sequential growth led seasonal projects especially in Communications, Media & Technology and TTH (Travel, Transportation & Hospitality) Consolidated EBIT stood at INR 5,289 Mn, up by 33% YoY/13% QoQ against our estimate of INR 5,183 Mn, led by operating leverage and cost optimization. On the margins front, EBIT margin expansion by 107 bps QoQ/ -35bps YoY to 19.2% against our estimate of 18.7%. Consolidated PAT stood at INR 4,375 Mn, up by 34% YoY/10% QoQ against our estimate of INR 4,330 Mn. Deal wins remain strong with order book for the Q3FY22 was $358 million, up 14.6% year-over-year and YTD TCV crosses $1.2 billion due to strong demand, aggressive customer mining, and end-to-end digital transformation capabilities. Client added: The company has 265 active clients as of December 31, 2021, $5 million+ clients grew by 2, total 52, and $10 million+ clients grew by 3, total 33.

Outlook

At a CMP of INR 4,744, Mindtree is currently trading at a P/E of 35.4x to its FY24E EPS of INR 133.8. Mindtree delivered in-line revenue, beat on margin despite furlough and wage hike. We believe that it will maintain growth momentum going forward backed by a robust pipeline and strong demand environment as it book TCV of $358mn in the quarter( up 14.6% YoY). The company remains confident of delivering an EBITDA margin of >20% despite the ongoing supply-side challenges, supported by better margins in new deals. Considering expensive valuations and margin pressure, we value Mindtree at a P/E of 35x to its FY24E EPS of INR 133.8 which yields a target price of INR 4,684 per share. We maintain our Neutral rating on the stock.

More Info on Trent

At 16:00 hrs Mindtree was quoting at Rs 4,545.00, down Rs 198.80, or 4.19 percent.

It has touched an intraday high of Rs 4,652.90 and an intraday low of Rs 4,477.25.

It was trading with volumes of 94,831 shares, compared to its thirty day average of 30,925 shares, an increase of 206.65 percent.

In the previous trading session, the share closed up 2.36 percent or Rs 109.45 at Rs 4,743.80.

The share touched its 52-week high Rs 5,059.15 and 52-week low Rs 1,539.85 on 18 November, 2021 and 24 February, 2021, respectively.

Currently, it is trading 10.16 percent below its 52-week high and 195.16 percent above its 52-week low.

Market capitalisation stands at Rs 74,904.02 crore.

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