Broker's call: Mindtree (Sell)

| Updated on April 20, 2021

Emkay Global

Mindtree (Sell)

Target: ₹1,650

CMP: ₹2,043.50

Mintree's March 2021 quarter operating performance was broadly in line with our expectations. Revenue grew 5.2 per cent q-o-q to $288.2 million. EBITDAM declined about 120 bps q-o-q to 21.9 per cent due to salary hike, higher subcontracting costs and adverse currency movement.

Mindtree continued to focus on growing the annuity business and cross-selling and up-selling to strategic clients to accelerate revenue growth. It is confident of delivering double-digit revenue growth in FY22 and sustaining EBITDAM above 20 per cent.

Deal wins remained healthy in Q4 at $375 million, taking the total FY21 deal intake to $1.4 billion (12.3 per cent y-o-y growth). Management indicated that the deal pipeline is closer to an all-time high, with a good mix of annuity deals offering good revenue visibility.

We raise our FY22/23 EPS by 2 per cent/3 per cent, factoring in FY21 performance and benefits accruing from flattening the employee pyramid. Considering rich valuations, dependency on top client and anticipated pressure on margins over the medium term, we maintain Sell with a revised target price of ₹1,650 at 20x FY23E EPS (earlier ₹1,580).

Published on April 20, 2021

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