Target: ₹4,167

CMP: ₹3,683.50

Mindtree (MTCL) has reported revenue growth of over 5 per cent q-o-q (CC) for the fifth consecutive quarter in Q4-FY22. Revenue stood at $384 million, growing at 5.2 per cent q-o-q (CC) and 4.8 per cent q-o-q ($) (Isec: 4.9 per cent, Cons: 4.3 per cent).

Margin performance was impressive with EBIT margin at 18.9 per cent, negative 30bps q-o-q (Isec: 18.1 per cent, Cons: 18.8 per cent), above our estimates. FY22 margins are at 18.6 per cent, up 120bps y-o-y.

MTCL added 3,112 employees, up 10 per cent q-o-q and 47 per cent y-o-y in Q4-FY22 (vs average addition of 2.7K per quarter in 9MFY22). The company has been adding 1.5K+ freshers every quarter since last 2-3 quarters. It has added a delivery centre in Pune and opened a new development centre in Kolkata.

Utilisation improved to 83.1 per cent (vs 81.5 per cent in Q3-FY22) despite strong hiring during the quarter. This was due to MTCL’s ability to bill its freshers on a quicker timeframe. LTM attrition increased to 23.8 per cent, +190bps q-o-q, in line with industry standards.

Management expects this to gradually stabilise over coming quarters. We believe MTCL is handling supply side mechanism most efficiently in our coverage.