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Cholamandalam Securities
Mindtree (Underperformer)
Target: ₹ 904
CMP: ₹1,027.90
Mindtree’s revenue, excluding for the top account, plunged (about 16 per cent QoQ) ₹1,830 crore, largely weighed by travel, transportation and hospitality. Despite the sharp drop in revenue, the EBIT margin remained resilient, aided by operational efficiencies and favorable currency. While the deal win run-rate was maintained (QoQ), the mix was more skewed toward renewals. The top account / overall outlook remained positive/stable.
The company reported yet another quarter of strong performance from the top account (Microsoft, +10 per cent QoQ and +44 per cent YoY). With the exception of this account, remaining portfolio saw steep decline (16 per cent QoQ; 16 per cent YoY). While the top account now contributes nearly 30 per cent to revenue, the Hi-Tech and Media vertical accounts for half of the overall revenue.
The company’s order book increased 89.9 per cent QoQ and 62.4 per cent YoY to $393 million.
Management indicated that the worst impact of Covid-19 was largely behind. It hinted that Q2-FY21 should be better than Q1-FY21.
Given the recent sharp run-up in stock price near term positives seems largely priced in. We revise our rating to an 'underperformer' with a target price of ₹904.
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