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Chola Securities
Mindtree (Buy)
CMP: ₹821
Target: ₹1,103
Mindtree is a mid-cap IT company with revenues of ₹5,460 crore (FY18).
In 2QFY19, Mindtree’s revenue grew by 7.1 per cent q-o-q to ₹1,750 crore in line with our expectations of ₹1,760 crore largely driven by volume (+6.3 per cent q-o-q) and rupee depreciation. In dollar terms, revenues grew by 2 per cent q-o-q. In constant currency terms, revenue grew by 2.4 per cent q-o-q. Revenue from digital business grew by 3.3 per cent q-o-q contributing 48.1 per cent to total revenues.
Management indicated that 3QFY19 revenue growth would be on similar lines to the current quarter. Margins are expected to slightly improve given the growth momentum. Growth in retail, CPG and manufacturing vertical would see a revival in the coming quarters considering the deal pipeline.
We assign a target P/E multiple of 18X on FY20EPS to arrive at a target price of ₹ 1,103. We give a ‘buy’ rating on the stock.
Risks: Unfavourable cross currency movement and further delay in deal closures and high client concentration can have a material impact.
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