Home > Markets > Stock Markets > Mindtree gains 9%; analysts say it’s a better bet than mid-cap peers

MUMBAI: Shares of Mindtree Ltd surged 9.5% on Monday buoyed by a nearly 5% sequential rise in its January-March consolidated net profit to 206.2 crore.

At 1145 am, the stock traded at 854.35, up 9.4% from its previous close, while the benchmark Senex was up 2.2% at 32008.73 points.

During the quarter under review, revenue rose 4.3% to 2,050.5 crore. The results were announced after market hours on Friday.

According to analysts at Edelweiss Securities Ltd, given its strong deal wins, Mindtree looks better positioned than its mid-cap peers to weather the imminent near-term storm as demand may hit its nadir in first half of FY21. “This coupled with an expanding margin trajectory, not to mention a strong US dollar and weak rupee, underpins our unchanged 18 time Q2FY22 earnings per share (EPS). The stock is trading at 17.6 times FY21 EPS," said the brokerage firm.

Others agree.

Motilal Oswal Financial Services feels that higher-than-expected deal wins, exit margins, and confidence about timely deal ramp-ups indicate that the covid-19 disruption in FY21 may not be as bad as initially feared. “In fact, Mindtree is likely to benefit from the widespread adoption of digital/collaborative tools in response to the pandemic. In conjunction with the tailwind due to an exchange rate assumption reset, we upgrade our FY21–22 EPS by up to 15%," the brokerage firm said.

In dollar terms, the company's net profit grew 1.8% quarter-on-quarter to $28.2 million in Q4 FY20, while revenue rose 1.2% to $278.40 million.

"Mindtree’s March quarter surprised positively on margin performance, with adjusted EBIT margins improving to 14.8%, reflecting disciplined execution under the new leadership in second half of FY20 and aided by a curtailment of selling, general and administrative expenses (SG&A) staff," said Emkay Global Financial in a recent report to clients on April 24.

Consolidated EBITDA (earnings before interest, taxes, depreciation, and amortization) for Q4 FY20 was at 351.20 crore, up 14.7% from 3,063 reported in October-December.

Mindtree said it had 307 active clients as of 31 March, which includes 23 $10-million clients. Employee count stood at 21,991, with a trailing 12-month attrition rate at 17.4%.

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