Cholamandalam Securities is bullish on Mindtree has recommended buy rating on the stock with a target price of Rs 1103 in its research report dated October 19, 2018.
Cholamandalam Securities' research report on Mindtree
In 2QFY19, Mindtree’s revenue grew by 7.1% QoQ to INR 17.5bn in line with our expectations of INR 17.6bn largely driven by volume (+6.3% QoQ) and INR depreciation. In USD terms, revenues grew by 2% QoQ. In constant currency terms, revenue grew by 2.4% QoQ. Revenue from Digital business grew by 3.3% QoQ contributing 48.1% to total revenues. EBITDA grew by 16.8% QoQ to INR 2.7bn in-line with our expectations. EBITDA margin expanded by 130bps QoQ to 15.4%. EBITDA margin expanded on account of rupee depreciation (+130 bps) and presence of one off cost in the base quarter (+60bps) which was offset by negative impact of promotion and campus hire (-60bps). PAT improved by 30.4% QoQ to INR 2,063mn, 8% above our expectation of INR 1,900mn on account of higher other income.
Outlook
At CMP, the stock is trading at a P/E 17.7X/13.5X FY19E and FY20E EPS. We assign a target P/E multiple of 18X on FY20EPS to arrive at a target price of INR 1,103. We give a BUY rating on the stock.
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