MindTree - March 2013 Results Preview - Motilal Oswal

- MTCL, which grew its USD revenue by 2.5% QoQ in 3QFY13, expects its growth in 4QFY13 to be very similar to that in 3Q. We expect revenue at USD112.6m in 4Q, implying a growth of 2.5%.

- In Rupee terms, our growth estimate stands at INR6.1b, +3.5% QoQ. Revenue growth in INR is greater than that in USD, unlike peers, for 4Q due to MTCL's accounting practice of taking prevailing dollar rate at the beginning of the month for the whole month.

- Company cited investments in resources across the board, including intake of recruits from campus. Due to these investments, margins are expected to decline sequentially. Our estimate for EBITDA margin is 19.2%, down 120bp QoQ. Our SGA estimate is up 50bp QoQ to 20.5%.

- Our PAT estimate for the quarter is INR856m, which implies a PAT margin of 14%, down 270bp QoQ. Apart from lower operating margins sequentially, forex gains of INR142m in 3QFY13 also feed into the weaker PAT QoQ in 4Q.

- MTCL had guided for a significant recovery in growth in FY14, driven by improving demand in its top 50 clients and also improving outlook on growth in the PES segment. Following Nasscom's growth outlook of 12-14% for the industry, company's growth guidance relative to the same will be keenly watched. To grow at the mid-point of the same, MTCL needs to post a CQGR of 3.6% in FY14E.

- The stock trades at 9.7x FY14E and 9.2x FY15E earnings. Maintain Buy.

Source : Equity Bulls

Keywords