Mindtree - Operating Results inline, constant OPM gains to lead upgrades - Dolat Capital

Mindtree declared its Q4 FY12 results with a topline growth of 1.2% at Rs.5.2bn, largely in line with our expectations of Rs.5.3 bn. In USD terms, Company delivered a growth of 1.3% QoQ at USD 105 mn, driven by strong volumes uptick of 4.9% (Previous quarter volumes has declined by 0.8%) covering up for pricing fall of 3.6%; booked from a transition project of a key European client.

The deal momentum continue to remain strong as it bagged couple of key deals and added 6 new clients during the quarter. Top client revenue share declined 7.4% QoQ as it normalized from the one time revenue booking of a mile stone project in previous quarter. Top 2-5 accounts grew 7.6% sequentially.

EBITDA margins improved further by 148bps (company has shown an EBITDA margin improvement by 749 bps from 11.2% in Q4FY11 to 18.7% in Q4FY12) as it benefited through rationalization in the employee pyramid and improvement in the realizations from Fixed Price projects.

PAT grew by 13.7% QoQ at Rs.689mn ahead of our estimates of Rs.618 mn, on account of better operational efficiency and increased other income (up 41% QoQ at Rs.51 mn).

The management is confident on the outlook for IT services but has cautioned on opportunities from the semi-conductor and consumer device segments in the coming period (H1). The company expects growth ahead of industry for FY13 but largely back ended. We believe the sustained business momentum; improved efficiency would support the valuations upgrades. We continue to remain positive on the stock with a Buy rating on the stock and a target price of Rs.625 (valued at 8x of its FY14E EPS of Rs.78).

Source : Equity Bulls

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