Mindtree rallies 9% after strong Q4 numbers; here's what analysts say

NEW DELHI: Shares of Mindtree rallied 9 per cent in Monday’s trade as the mid-cap IT firm’s March quarter results beat Street estimates.

The stock jumped 9.47 per cent to hit a high of Rs 854.70 on the BSE as the It firm reported a 3.9 per cent year-on-year (YoY) rise in consolidated net profit at Rs 206.2 crore compared with Rs 198.4 crore in the corresponding quarter last year.

Consolidated net revenue of the company increased 11.5 per cent on a yearly basis to Rs 2,050.5 crore. The company closed FY20 with the highest ever deal wins of $1.2 billion.


“Mindtree’s Q4 numbers topped expectations—revenue, up 1.2 per cent QoQ in dollar terms, and outclassed Street’s 0.3 per cent estimate while adjusted EBIT margin, up 150 bps QoQ to 13.5 per cent, also beat the forecast,” said Edelweiss Securities.

Given its record deal-wins at $393 million, Edelweiss said Mindtree looks better positioned among mid-cap peers to weather the imminent near-term storm, as demand may hit its nadir in H1FY21.

“This coupled with an expanding margin trajectory, not to mention a strong dollar, underpins our unchanged 18 times Q2FY22 EPS,” it said while retaining a buy on the stock with a target price of Rs 945.

Even as the company indicated softness in demand due to which the near-term performance would be impacted, Motilal Oswal Financial Services found the commentary stronger than that of some largecap companies.

“Given its high exposure to Travel & Hospitality (16 per cent of revenue), we had made sharp downgrades to the company’s revenue and Ebitda margin trajectory during Q4 preview. However, the company’s strong execution, continued growth in the top account, robust deal wins, and confident commentary suggest disruption is likely to be lower than initial expectations,” Motilal Oswal said while suggesting a target price of Rs 960 for the stock.

Mindtree hinted at an Ebitda margin of 17-18 per cent going ahead. It expects Ebitda margins in FY21 to be better than in FY20 despite the Covid 19 impact.

Mindtree’s CEO, said Kotak Institutional Equities, has done well to stabilise the organisation, initiated shift towards managed services model and augmenting senior management depth after recent departures.

“The key challenge ahead for Mindtree is to ensure smooth transition to managed services while preserving core strengths in digital,” Kotak said while recommending a target of Rs 760 on the stock.