Earnings Update - Mindtree Ltd (MTCL IN) - Soft revenue growth with strong order book - CSEC Research

In 3QFY17, Mindtree's consolidated revenues declined marginally to INR 12,953mn. Dollar revenue declined 0.4% QoQ to USD 193.9mn. However, constant currency grew by 0.4% QoQ. Blended volume declined by 3% QoQ led by offshore (-3.2% QoQ) and onsite (-2.2% QoQ). Decline in the volume was partly offset by higher blended pricing realization.

- The EBITDA margin increased by 90 bps QoQ to 13.4% on account of lower other expenses (-4.5% QoQ) and better operation efficiency. Reported PAT came in at INR 1,031mn (+8.8% QoQ & -26.7% YoY).

- Amongst geographies, the growth was led by the US (+1.2% QoQ in dollar terms), while Europe and India revenue decline by 3.2%QoQ/11.8% QoQ, respectively. Amongst Vertical, Travel and Hospitality grew by 4.4% QoQ, while BFSI declined by 2.8% QoQ. Amongst Services, IP Led revenue grew by 16.2% QoQ, IMS (+1.6% QoQ) and Consulting (+2.2% QoQ), while engineering, maintenance and package implementation declined sequentially by 3.5%, 1.5% and 5.7%, respectively.

Valuation: Management indicated that next quarter revenue growth would be similar to previous quarter due to slower ramp up of won deals, weakness in BFSI and specific client issue. Currently stock is trading at a P/E 14.3X/12.1X FY18E/ and FY19E EPS. We assign a target P/E multiple of 12X on FY19E to arrive at a target price of INR 466 and upgrade to MARKETPERFORMER rating on the stock.

Risks: Unfavorable cross currency movement & further delay in deal closures can have a material impact. Increased volatility in the Hi-Tech.

Shares of MINDTREE LTD. was last trading in BSE at Rs.472.35 as compared to the previous close of Rs. 461.7. The total number of shares traded during the day was 28304 in over 960 trades.

The stock hit an intraday high of Rs. 474.45 and intraday low of 462. The net turnover during the day was Rs. 13322536.

Source : Equity Bulls

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