MindTree tanks 5% on disappointing Q2 results; Jefferies maintains ‘buy’

NEW DELHI: MindTree Ltd slipped over 5 per cent in early trade on Wednesday after the Bangalore-based mid-sized information technology service company lowered its revenue growth guidance to below 11 per cent for the current financial year, from 11-14 per cent sales outlook given earlier.

At 11:00 am, MindTree pared some of its early morning losses and was trading 3.9 per cent lower at Rs 650.80. It has hit a low of Rs 635 and a high of Rs 678 today on the Bombay stock Exchange (BSE).

Even after the disappointing results, Jefferies maintain a ‘buy’ rating on MindTree and has also upped the price target from Rs 775 earlier to Rs 790. The brokerage feels that margin upside should continue to lead to consensus upgrades.

“Compared to the previous quarter, revenue grew 5.9 per cent while profit declined 19 per cent from previous quarter. In dollar terms, sales touched $107.3 million while net profit was $12.9 million,” ET reported. At Rs 596 crore, Mindtree’s revenues grew 31 per cent from a year ago while profit rose 33 per cent to Rs 72 crore.

“Because of muted growth in 1HFY2013, the management has lowered its revenue growth guidance from 11-14 per cent earlier to less than 11% now, which does not bode very well with the company,” said Angel Broking in a report.

This is the second time the company has lowered its forecast.

“The company has recently set up a team to chase large deals and management indicated that large deal closure is happening, but at a slower rate,” the report noted.

The Mumbai-based brokerage firm continues to be positive on the stock owing to its diversified revenue portfolio and past performance.