Brokerages see up to 14% upside in Mindtree shares
Premium- The IT company reported a net profit of ₹317.3 crore in Q4, up 53.9% from a year ago.
Mindtree’s Q4 results for the March quarter came mostly in line with the estimate. The company reported a net profit of ₹317.3 crore, up 53.9% from a year ago. The company’s revenue in dollar terms grew 5.2% on quarterly basis and 3.5% YoY. Its operating margin stood at 21.9% as compared to 23.1% in Q3FY21, as it was impacted by employee costs and higher other expenses.
The brokerages see upside in the company's stock after the quarterly earnings. In the result note, YES securities said that the IT company reported inline performance. The INR revenue growth was impacted by rupee appreciation in the quarter, it added. The company continues to see strong demand environment for digital, data and cloud technologies. The brokerage sees 13.6% upside in Mindtree’s share price. It has set a target price of ₹2,350 per share.
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Motilal Oswal believes that Mindtree’s current valuations are fairly pricing in growth, The brokerage said that the company delivered another strong quarter, with dollar revenue growth of 5.2% on sequential basis above their estimate of 4.3%, driven by robust growth outside of the top 10 accounts and end of discounts in the Travel and Hospitality vertical.
Decoding the earnings, Motilal Oswal in the note said that the IT company was able to deliver better than expected EBIT margin in Q4FY21 as wage hike impact was partially compensated by operational efficiency and higher utilization. This strong growth should help the company maintain its EBITDA margin at 20.8% (flat YoY), despite higher investment in sales, selective employee interventions, and significant ramp up in its employee base, it added.
Motilal Oswal maintains its Neutral rating on the stock with a target price of ₹2,180 per share due to higher client concentration (top account constitutes 28% of revenue), lack of growth in the top 2-10 accounts, and fair valuations. The key positives are already captured, therefore the brokerage sees limited upside hereafter.
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