Citigroup recommends 'Buy' ratings on Mindtree
MindTree delivered strong q-o-q growth of about 6%. IT Services revenues increased about 10% sequentially while R&D services had growth of about 6%.
By ET Bureau |
MINDTREE
RESEARCH: CITIGROUP
RATING: BUY
CMP: RS 575
MindTree delivered strong q-o-q growth of about 6%. IT Services revenues increased about 10% sequentially while R&D services had growth of about 6%. Software product engineering and MindTree wireless witnessed a sequential decline on a q-o-q basis. For FY11, the management indicated good business momentum and expects to grow faster than the industry. For FY11, management guided to stable margins on the standalone business despite wage hikes of 13-15 % offshore and 2-4 % onsite. Management indicated that it would be investing about $10-11 million in the product business in H1FY11. The number came as a surprise. The stock has performed well with returns of about 20% over the last two months. Standalone business is recovering and the return of discretionary spend should benefit MindTree on the IT services side. However, investor focus is likely to be on the higher investments in product business, where revenue visibility is low and peers have had limited success. Investors will wait for more clarity on revenue potential in the product business and the stock could likely be under pressure in the near term.
RESEARCH: CITIGROUP
RATING: BUY
CMP: RS 575
MindTree delivered strong q-o-q growth of about 6%. IT Services revenues increased about 10% sequentially while R&D services had growth of about 6%. Software product engineering and MindTree wireless witnessed a sequential decline on a q-o-q basis. For FY11, the management indicated good business momentum and expects to grow faster than the industry. For FY11, management guided to stable margins on the standalone business despite wage hikes of 13-15 % offshore and 2-4 % onsite. Management indicated that it would be investing about $10-11 million in the product business in H1FY11. The number came as a surprise. The stock has performed well with returns of about 20% over the last two months. Standalone business is recovering and the return of discretionary spend should benefit MindTree on the IT services side. However, investor focus is likely to be on the higher investments in product business, where revenue visibility is low and peers have had limited success. Investors will wait for more clarity on revenue potential in the product business and the stock could likely be under pressure in the near term.
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