StocksMarket.in

Hold MindTree; target of Rs 690: ICICI Direct

October 18
16:24 2019

ICICI Direct’s research report on MindTree

After a weak quarter performance in Q1FY20, Mindtree reported a good Q2FY20 with beat on revenues and in-line margins. Revenues in constant currency grew by 3.2% QoQ and 11.1% YoY while adjusted EBITDA margins expanded 40 bps QoQ to 13%. Growth in revenues was broad based among verticals across geographies. In terms of digital revenues, it increased 2.6% QoQ & 18.7% YoY and comprised 38% of revenues while digital TCV was up 2.2% QoQ. Pointers which were key draggers in this quarter were 1) Dip in total TCV by 5.2% QoQ 2) Increase in attrition to 16.5% (vs. 13% in Q2FY19) and 3) Decline in top 2-5 clients by 4.3% QoQ.

Outlook

Increasing attrition from last 4-5 quarters and decline in realisation is a key near term concern. However, steady quarter, healthy deal pipeline from the new business and expected margin improvement in coming quarters are key positives to be look at. Hence, we revise our recommendation from REDUCE to HOLD with a revised target price of Rs 690/share. Key things to watch out in coming quarters are 1) Attrition 2) Realisation 3) Deal TCV and 4) Digital revenue growth.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .

Related Articles

Archives