PhillipCapital and IDFC Securities maintained their Neutral rating , while MOSL maintained its Buy rating on the stock.
Brokerage firms Citigroup, PhillipCapital, as well as Motilal Oswal slashed their target price for MindTree post Q2 results after the company missed revenue estimates, expensive valuations as well as cautious macro commentary in contrast to current sector mood.
Reacting to the results, MindTree slipped as much as 17.5 percent in first one hour of the trading session on Friday.
Midcap software company Mindtree's second quarter (July-September) consolidated profit surged 30.4 percent sequentially to Rs 206.3 crore, driven by strong operational growth.
Revenue during the quarter grew by 7.07 percent to Rs 1,755.4 crore QoQ, the company said, adding revenue in dollar terms increased 2 percent sequentially to $246.4 million and grew 2.4 percent in constant currency terms.
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Rupee depreciation resulted in better realisation and collection, said CFO Pradip Kumar Menon in a post-earnings conference call.
MindTree’s September quarter constant currency (CC) revenue showed a growth of 2.4 percent on a QoQ basis which was below analyst estimates of 5.7 percent QoQ and significantly below 8.2 percent QoQ CC in 1QFY19.
Motilal Oswal said that its estimate about CC revenue was based on management’s guidance of ‘slightly lower’ growth in 2Q compared to USD revenue growth in 1Q, but project completion in Retail in Europe and spill-over of replenishing deals into 3Q dragged the performance.
The brokerage firm maintained its buy rating on MindTree but slashed its target price to Rs 1125 from Rs 1260 earlier. “Soft commentary for near-term will weigh on the valuation multiple. The IT major witnessed revenue miss while cautious macro commentary in contrast to current sector mood is slightly negative,” said the report.
MindTree expects the growth in 3QFY19 to be comparable to 2QFY19. However, disconcerting was the commentary around customer sentiment.
Given the uncertainty around Brexit, customers are seen engaging in short-term extensions to existing contracts rather than longer-term programs, highlighted the MOSL report.
Citigroup downgraded the stock to neutral from buy earlier and has also slashed its target to Rs 1090 from Rs 1240 earlier. The company reported weak Q2 numbers.
The global investment bank expects the stock to correct given high expectations and sudden change in management commentary. It also slashed its EPS estimates and lowered valuation multiple.
Another brokerage firms PhillipCapital also maintained its Neutral rating on MindTree post Q2 results but slashed its target price to Rs 1,020 from Rs 1,070 earlier.
Muted revenue performance led by top client remained an overhang for the stock. The brokerage firm remains concerned about increasing dependency on top clients. Additionally, expensive valuations leave limited upside from current levels.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
