Mindtree Q1 Results: Mindtree share price fell nearly 3 per cent on Thursday to hit an intraday low of Rs 2,814.15 on BSE a day after the company posted better numbers for the quarter ended June 2022. Bengaluru-based IT services company reported a 37.3 per cent on-year growth in its consolidated net profit at Rs 471.6 crore for the quarter ending June 30, 2022. Mindtree’s revenue increased 7.7 per cent to Rs 3,121.1 crore compared with the previous three months.
This is a sixth straight quarter of more than 5 per cent revenue growth for the IT company in constant currency terms. So far this year, Mindtree shares have plunged 41 per cent. However, analysts see up to 69 per cent potential rally going forward on the back of strong growth.
Mindtree’s dollar revenue stood at $399.3 million, up 5.5 per cent sequentially in constant currency, making it the sixth consecutive quarter of 5 per cent-plus revenue growth in constant currency. The total contract value of deals stood at an all-time high of $570 million.
According to analysts at Edelweiss Securities, Mindtree posted strong Q1FY23 numbers – revenue grew 4.0 per cent QoQ to USD 399.3 mn, beating Street’s estimates of USD389.8mn, while in-line with their estimates of USD400mn. Margins improved 30bp to 19.2 per cent, also beating estimates of 18.6 per cent/18.3 per cent. PAT margin came in at 15.1 per cent compared to the estimate of 15.3 per cent/15.1 per cent. “Mindtree and LTI’s merger is progressing well. We believe a successful integration can create strong cross-selling opportunities. Overall growth and TCV were strong,” they said. The brokerage maintains a ‘Buy’ call on the IT services stock with an unchanged target price of Rs 4,917 (40x Q3FY24E).
“Mindtree’s 1Q results beat our estimates led by strong margin delivery on the back of lower employee costs. Deal wins at US$570m were at an all-time high and management reiterated strong demand for 1HFY23. However, RCM vertical remained subdued with signs of slowdown in spends," said analysts at Jefferies in a note.
While they have raised their estimates by up to 5 per cent, the brokerage house remains wary of Mindtree’s exposure to short-cycle deals, high client concentration and merger-related risks. It has maintained underperform rating on Mindtree shares with a target price of Rs 2,490.
Whereas according to Motilal Oswal, Mindtree management’s increased focus on annuity revenue and strategic accounts is reflected in its revenue and client mix. A strong outlook on strategic accounts, decent deal signings, and the ability to sustain improved margin are key positives for the stock. “The stock is currently trading at 20x FY24E EPS. As the key positives are already captured, we see limited upside hereafter,” it said. Brokerage’s target price of Rs 3,020 per share implies 21x FY24E EPS. It maintains a ‘Neutral’ rating on the stock.
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