CLSA maintains 'hold' rating on Mindtree amid all-time high valuations

MUMBAI: CLSA has maintained 'hold' rating on Mindtree, stating that the stock has moved well ahead of earnings recovery amid all time high valuations.

"...the stock has moved well ahead of earnings growth recovery and is up 85 per cent from the bottom in the past 6 months and is now trading at all time high valuations on recovered earnings," said HSBC in a note.

HSBC said Mindtree is likely to report a robust 13-14 per cent revenue growth in FY19 but this is on the back of a few extremely weak quarters.


"As the decline in large clients is now stabilised and new large clients are ramping-up, the near-term growth outlook is strong. So is the case for margins...However, the stock is already trading at peak valuations on these recovered estimates and there is no concrete evidence if this
performance will continue in FY20 and beyond," said HSBC.

With the recent pick-up in revenue growth momentum and better visibility on margins, HSBC has increased Mindtree's forward PE multiple to 18 times in-line with its larger peers Infosys and TCS. HSBC has also rolled over its valuation multiple to FY19 EPS, which led to the target price being revised to Rs 730 from Rs 500.

Shares of Mindtree ended down 1.57 per cent at Rs 817.90 on Thursday.