Mindtree - Laying the right foundation - Emkay

Reco: ACCUMULATE
CMP: Rs 806
Target Price: Rs 960

We attended Mindtree's maiden Investor and Analyst Meet in Bangalore yesterday. Mindtree management detailed it's strategy of "Back to Basics' approach that is aimed at transforming the company from a mid tier offshore IT Services company to a Global IT Solutions company with leadership in select sub segments and achieving higher than industry growth in the medium term. Mindtree highlighted the investments in account management and hunting ( co has already triped its sales presence and established a large deal hunting team which is targeting 'must have' accounts), industralization in delivery ( which should help as company achieves scale) and building domain strengths in industry verticals ( 'company spent more in training in FY13 as compared to past 13 years put together'). While we appreciate Mindtree's strategy of "laying the right foundation' to fortify itself in a maturing offshore IT Services sector, we continue to retain the thesis that 'Margin improvement led earnings upgrades' thesis is nearing it's fag end for Mindtree. Valuations no doubt are inexpensive at ~9x FY14/15E P/E however need to be weighed in context of Mindtree's volatile earnings history. We downgraded Mindtree to ACCUMULATE( V/s BUY earlier) in March'13 and retain our ratings and TP of Rs 960 for the stock.'

Source : Equity Bulls

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