We attended the virtual analyst meet of Mindtree Ltd. The company highlighted that it plans to grow via account mining, large annuity deals, digital transformation and growth via the partnership & inorganic route. The company has hired leadership (especially from tier 1) to scale large deals, 2) build M&A capability, 3) expand geographies and 4) scale verticals & service lines to achieve the growth objective. With this, coupled with vendor consolidation opportunity and captive carve outs, Mindtree aspires to have industry leading revenue growth in the long run. In the near term, the company is seeing healthy deal pipeline conversion and, hence, expects the momentum of Q2FY21 (up 3.1% QoQ in dollar terms) to continue in Q3FY21E (barring seasonality) and Q4FY21E. In terms of EBITDA margins, the company has multiple levers to sustain its margins at current levels (H2FY21 average margins at ~19%) despite investment in leadership, wage hikes and increase in other discretionary spends.
Valuation & Outlook
Healthy order book, higher pipeline, strategy to drive large deals, hire tier 1 leaders to scale growth and expertise in digital technology bode well for long term growth. This, coupled with ability to sustain healthy margins, prompt us to remain positive on the stock. Hence, we maintain our BUY rating and target price of Rs. 1680/share (22x FY23E EPS).
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Mindtree_AnlstMtUpdate_Dec20.pdf
Shares of MINDTREE LTD. was last trading in BSE at Rs.1436.95 as compared to the previous close of Rs. 1442.35. The total number of shares traded during the day was 38462 in over 2404 trades.
The stock hit an intraday high of Rs. 1452.7 and intraday low of 1429.4. The net turnover during the day was Rs. 55272310.