Mindtree’s share price tag soared 9.3% on Wednesday to trade at Rs 2,728 per share as investors reacted to the more than 61.2% on-year jump in net profit of the IT organization. While the stock price tag rose larger, analysts had been mixed on the outlook as some advised promoting the stock citing unsustainable margins, other asked investors to acquire more shares banking on the accelerated digital adoption globally. Mindtree’s share price tag has soared 62% so far this year, in addition to the 136% rally in the stock amongst April and December last year.
The IT firm reported a net profit of Rs 343 crore in the April-June quarter, up 61.2% from last year’s Rs 213 crore. The organization stated it is witnessing broad-based development across industries and services and that its deal pipeline continues to stay powerful. Revenue grew 20% to Rs 2,291 crore from the year-ago period.
Kotak Securities – Sell
Fair worth: Rs 1,900
The brokerage firm stated that Mindtree’s Growth was led by a jump in quick cycle applications and path towards normalization of spending in impacted travel vertical. Kotak Securities has raised EPS estimates by 5-6% and Fair Value to Rs 1,900 valuing the organization at 20X June 2023E EPS. However, analysts are cautious about the “ unsustainable EBIT margin profile and rich valuations”. “EBITDA margin guidance of 20%+ seems unsustainable noting cost headwinds, likely decline in utilization rates and increase in travel and other discretionary costs,” they stated.
ICICI Securities – Hold
Target price tag: Rs 2,375
Analysts at ICICI Securities stated that income development in the April-June quarter was largely in line with their estimates, but the high quality of development was weaker than usual. The brokerage firm stated that the investor’s focus will most likely shift to steady-state development/margins in FY23 and ahead. Moderation in cloud activity, rise in the share of onsite work and reversal of covid-led price savings (e.g. travel) are the crucial headwinds to watch out for. “At 28x FY23E EPS, street is already factoring in mid-teens revenue growth with 20%+ EBITDA margin over the medium term. Scope for further surprises/upgrades are less likely,” they added.
Motilal Oswal – Neutral
Target price tag: Rs 2,620
Motilal Oswal sees positives in the quarterly outcomes of Mindtree. “Since July 2019, after the disruption due to the ownership change, Mindtree has taken steps to stabilize its client and employee count,” they stated. Although the brokerage firm sees restricted upside possible, they think the stock is relatively valued. “The key positives are already captured, and we see limited upside hereafter. Our TP of INR2,620 per share implies 26x FY23E EPS,” they added.
HDFC Securities – Add
Target price tag: Rs 2,635
Seeing Mindtree’s powerful functionality, HDFC Securities stated income outperformance in Q1, all-time higher bookings and hiring reflecting powerful demand, and enhancing income profile (broad-based). “Mindtree’s growth mix has improved in recent times (vs. a skewed profile earlier), led by interventions to drive large/annuity deals,” HDFC Securities stated. The brokerage firm values Mindtree at 28x Jun-23E EPS.
(The stock suggestions in this story are by the respective analysis and brokerage firms. TheSpuzz Online does not bear any duty for their investment guidance. Please seek advice from your investment advisor prior to investing.)