Motilal Oswal has given Neutral recommendation for Mindtree with a target price of Rs. 2180 in its research report issued on Apr 17, 2021
Motilal Oswal’s research report on Mindtree
Mindtree (MTCL) delivered another strong quarter, with USD revenue growth of 5.1% QoQ, above our estimate of 4.3%, driven by robust growth outside of the top 10 accounts (+8.6% QoQ USD) and end of discounts in the Travel and Hospitality vertical (+17% QoQ USD). Deal TCV rose 20% QoQ to USD375m in 4QFY21 and the management indicated that deal pipeline is at a record high. It was able to deliver better than expected EBIT margin in 4QFY21 (18.6%, down 100bp QoQ) as wage hike impact (-240bp QoQ) was partially compensated by operational efficiency and higher utilization (84.3%, +120bp QoQ).
The stock is currently trading at 23x FY23E EPS. It has been one of the best performers in the IT sector in the last one-year, with returns of 175%. The key positives are already captured, and we see limited upside hereafter. Our TP of INR2,180 per share implies 24x FY23E EPS. Maintain Neutral.