Mindtree & Wipro - Q1FY21 Results Review - HDFC Securities

Mr Apurva Prasad & Mr. Amit Chandra, Institutional Research Analyst, HDFC Securities.

Mindtree: We maintain ADD on Mindtree, following a sub-par 1Q revenue performance, offset by its strong and sustainable operating trajectory. Significant growth divergence has been witnessed in the portfolio with T1 account (30% of revenue) posting double-digit QoQ, travel & hospitality (8% of 1Q revenue) downsizing to half sequentially and the residual business (~62% of revenue) posting -4.6% QoQ. Key positives include the following: (1) strong and institutionalised operational recovery, supported by SG&A optimisation, (2) growth recovery in 2Q, supported by the Realogy (large deal) ramp-up and demand recovery ex-travel & hospitality on strong renewal deal wins; and (3) DSO (including unbilled) moderation supporting strong cash generation, coupled with improving segmental profitability. Risks remain a skewed growth profile. Our target price of Rs 1,090 is based on 18x Jun-22E EPS (+5% increase in EPS estimate).

Wipro: We maintain ADD on Wipro, based on in-line revenue performance and positive surprise on margins. The decline in revenue was broad-based with the highest impact witnessed in the communication, consumer and manufacturing verticals. The company has restrained from giving guidance based on an uncertain environment. The outlook remains muted for ~51% of the business comprising BFSI, retail, travel, manufacturing and energy. This may be offset by relatively better outlook in consumer (e-commerce and new age media), healthcare (hospitals), utilities and communication. Key positives include (1) strong margin expansion supported by cost optimisation, (2) pick-up in deal activity, and (3) strong cash generation (OCF is ~175% of net income). Our target price of Rs 255 is based on 14x Jun-22E EPS (+4% increase in EPS estimate, based on margin expansion).

Shares of MINDTREE LTD. was last trading in BSE at Rs.975.75 as compared to the previous close of Rs. 977.95. The total number of shares traded during the day was 120465 in over 5627 trades.

The stock hit an intraday high of Rs. 1010.95 and intraday low of 963.3. The net turnover during the day was Rs. 118821592.

Shares of WIPRO LTD. was last trading in BSE at Rs.262.95 as compared to the previous close of Rs. 225.05. The total number of shares traded during the day was 6313161 in over 76545 trades.

The stock hit an intraday high of Rs. 265.5 and intraday low of 233.8. The net turnover during the day was Rs. 1629694172.

Source : Equity Bulls

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