Sell Mindtree; target of Rs 1560: Dolat Capital Market

Dolat Capital Market is bearish on Mindtree has recommended sell rating on the stock with a target price of Rs 1560 in its research report dated January 18, 2021.

The four stocks they exited are Macpower CNC Machines, NDR Auto Components, Novartis India and RSWM, according to Dolat Capital.

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Dolat Capital Market’s research report on Mindtree

Mindtree reported 4.6% CC QoQ growth (DE: 3.3%) led by sustained traction across biz segment except BFSI which grew 0.9% QoQ. OPM improved yet again by 289bps QoQ to 19.6% (DE: 17.1%) led by gains from offshore shift (Off-Shore effort up 90bps QoQ) and improved utilization (up 430bps) that ensured flat wage bill QoQ basis. TCV stood at $ 312Mn taking the TTM TCV to $ 1.4Bn (up 29.5% YoY) with a Revenue coverage of 1.31x, provides comfort on growth visibility. Mindtree expects momentum to continue in CY21 as the pipeline remains healthy and demand is robust across industries. Mindtree has guided EBITDA Margins to sustain` over 20%+ (Current: 23.1%) over coming quarters despite upcoming wage hike and plans to focus on re-investment to sustain growth which believe is stretched beyond H1CY21, as operational cost normalizes.

Outlook

Operating metrics have improved in Q3 on sequential basis both on growth but is still modest on YTD basis. Post the strong performance we have upgraded our EPS estimates by ~3% but believes positives are well priced and thus maintain Sell rating on the stock valued at 20x FY23E earnings (implies 2x on PEG basis).

For all recommendations report, click here

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