Scripting a survival
Zee’s founding family plots a twist in the tale and stays in control
Shares of Bengaluru-based IT services firm Mindtree recorded fresh highs on Thursday, after the company reported strong results for the quarter-ended September 2021.
At 3 pm, Mindtree was trading at ₹4,675.30, up ₹312.05 or 7.15 per cent. It recorded a fresh 52-week high of ₹4,937.15. The stock opened at ₹4,590 as against the previous close of ₹4,363.25. It recorded an intraday low of ₹4,550.00.
On the NSE, it was trading at ₹4,679.95, up ₹316.10 or 7.24 per cent. It recorded a 52-week high of ₹4,937.65.
Mindtree reported a net profit of ₹398.9 crore, an increase of 57.2 per cent on a year-on-year basis on the back of broad-based growth momentum. On a sequential basis, it grew 16.2 per cent.
Revenues rose 34.3 per cent to ₹2,586.2 crore on a year-on-year basis and 12.9 per cent on a quarter-on-quarter basis. Debashis Chatterjee, Chief Executive Officer and Managing Director of Mindtree, said the revenues in dollar terms on a year-on-year basis for the quarter was the highest in a decade.
The revenue in dollar terms was $350.1 million, a 12.7 per cent sequential growth and 34.1 per cent on an year-on- year basis. The net profit stood at $54 million, recording a growth of 16 per cent and 57.3 per cent on a year-on-year basis. The Bengaluru-based IT services company has approved an interim dividend of ₹10 a share. Its trailing attrition rate was 17.7 per cent.
Mixed views from Brokerages
Brokerages were largely neutral on the stock, seeing limited upside in the future.
Motilal Oswal Research gave the stock a ‘Neutral’ rating with a target price of ₹4,460, with a 2 per cent upside.
“The management’s increased focus on annuity revenue and focus on strategic accounts is reflected in its revenue and client mix. A strong outlook for strategic accounts, decent deal signings, and the ability to sustain improved margin are key positives,” it said in a note.
“The stock is currently trading at 37x FY23E EPS. It has been one of the best performers in the IT sector in the last one-year, with returns of 175 per cent. The key positives are already captured and we see limited upside hereafter,” it added.
Emkay maintained a ‘Sell’ rating on the stock with a revised target price of ₹3,300 at 30x Sep’23E EPS (earlier ₹3,070), considering rich valuations and anticipated pressure on margins.
HDFC Securities, however, was bullish on the stock, giving it an ‘Add’ rating at a target price of ₹4,400.
“The company remains confident of delivering an EBITDA margin of >20 per cent despite the ongoing supply side challenges, supported by better margins in new deals, increasing offshoring, and better utilisation,” it said in a note.
To address the rising attrition (+400bps) the company will continue to hire freshers, focus on reskilling existing employees, and rely on sub-contracting for niche talent. We increase revenue/EPS estimates by 6/10 per cent for FY23/24E to factor in higher growth. Our target price of ₹4,400 is based on 35x Dec-23E EPS (23 per cent CAGR over FY21-24E on a high base in FY21 of >70 per cent),” it said.