Mindtree - Delivers again; Remains cheap - IIFL

Mindtree's 1QFY13 revenue growth of 0.4% (US$, QoQ) was in line with expectations. IT services recorded a healthy revenue growth (USD) of 3% QoQ; however, ramp-downs at two clients in the production engineering services (PES) vertical led to its revenue declining 5.1% QoQ.

- Mindtree is one of the largest beneficiaries of depreciating INR and its Ebitda margins improved by a strong 210bps QoQ despite headwinds of wage increases (for a month).

- The company's investments in account mining continue to yield results. As seen for over a year now, top-10 accounts continue to drive growth. Over the past year, revenue contribution from top-10 accounts increased from 39% to 47%.

- With relatively lesser large deal closures in FY13 and a lacklustre demand environment, we expect growth rates to remain muted. However, recent deal wins in PES improve its near-term outlook.

- Valuations are cheap at less than 9x FY13ii one-year forward P/E. We maintain BUY.

Source : Equity Bulls

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