HSBC downgrades MindTree to ‘Neutral’ rating post quarterly results

MUMBAI: HSBC has downgraded MindTree to ‘Neutral’ from ‘Over Weight’ rating after the company’s quarterly earnings report. It is of the view that revenues are likely to remain flat sequentially in Q4 2012 due to one-time revenue stream in Q3.

“MindTree reported an in line quarter with Q3 2012 revenues of USD104m, up 2.3% q-oq. This was largely led by a one-time revenue stream (from a project transition), with better realisation up 3.5% q-o-q. Volumes declined 0.8% q-o-q owing to lower working days. Because of the one-time revenue stream in Q3, revenues are likely to be flat sequentially in Q4 2012, even if volume growth accelerates,” the report said.

“We update our estimates; while our 2012e EPS increases 18% to INR 49.3 as we factor in INR depreciation, our 2013e EPS is largely unchanged (INR47.17 from INR47.22).

Our PE-based TP of INR 470 is also unchanged and implies 7.2% potential return, which is within the Neutral band of our model. We therefore downgrade the stock to N from OW,” it added.