Mindtree (MTL IN) - Healthy growth with strong order book - CSEC Research

Healthy growth with strong order book

- In 4QFY17, MindTree's dollar revenues grew 1.8% QoQ to USD 195.6 mn. Revenues in rupees term grew 1.8% QoQ to INR 13,181 mn. Constant currency revenues grew 2% QoQ led by volume growth of 2.2% QoQ (onsite: 6.1% QoQ & Offshore: 1% QoQ).

- EBITDA margins increased 80bps sequentially to 14.2% led by revenue growth and lower other expenses. Forex loss of INR 228mn vs. gain of INR 32mn in 3QFY17 has impacted net profit by -5.7% QoQ to INR 972mn .The Company has declared a final dividend of INR 3 per share.

- Amongst geographies, growth was led by the US, which grew 3.4% QoQ in dollar term followed by Europe +1.8% QoQ, mainly on account of growth in Bluefin's revenue. India de-grew 8.1% QoQ on top of 11.8% de-growth in 3QFY17. Amongst verticals, BFSI grew 4.3% QoQ followed by technology, media & services which grew 4% QoQ and travel & hospitality which grew 0.4% QoQ, while retail, CPG & manufacturing declined 2.9% sequentially. Traditional services like IMS grew 2.3% QoQ, maintenance grew 5.8% QoQ, independent testing services grew 1.0% QoQ, consulting grew 4.4% QoQ, package implementation grew 3.4% QoQ, while development and IP led revenue declined 2.3% and 5.5% QoQ, respectively.

Valuation: The management expects FY18E to post lower double digit revenue growth in CC terms and also expects FY18E margins to be better than FY17 on a CC basis, given the presence of multiple levers as productivity enhancements and improvement in performance of its acquisitions Bluefin and Magnet 360. Currently the stock is trading at a P/E 16.0X/13.4X FY18E and FY19E EPS. We assign a target P/E multiple of 13X on FY19E to arrive at a target price of INR 468 and maintain 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.495.9 as compared to the previous close of Rs. 485.45. The total number of shares traded during the day was 58190 in over 1981 trades.

The stock hit an intraday high of Rs. 498 and intraday low of 482.5. The net turnover during the day was Rs. 28655962.

Source : Equity Bulls

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