Buy MindTree; target of Rs 550: PLilladher

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Buy MindTree; target of Rs 550: PLilladher

Prabhudas Lilladher is bullish on MindTree and has recommended buy rating on the stock with a target of Rs 550 in its January 18, 2012 research report.

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Prabhudas Lilladher is bullish on MindTree and has recommended buy rating on the stock with a target of Rs 550 in its January 18, 2012 research report.

"MindTree (MTCL) reported top-line growth in-line with expectation, whereas margin expansion was ahead of expectation. This is the third consecutive quarter of positive surprise. We believe continued focus on margin improvement along with steady revenue growth would result in better-than-peer bottom-line growth."

"MTCL reported Q3FY12 results ahead of expectation. Revenue growth was 13.8% QoQ at Rs5.19bn (PLe: Rs5.22bn, Cons: Rs5.19bn) in INR terms and grew by 2.3% (@cc 3.1%) QoQ in USD terms to $103.7m (PLe: $103.4m). EBITDA margin expanded by 438bps QoQ to 17.3% (PLe: 16.0% Cons: 15.8%) aided by pricing improvement and currency depreciation. EPS grew by 10.6% QoQ to Rs14.91 (PLe: Rs14.83, Cons: Rs12.84), due to forex loss. The management commentary was cautious. Sales cycle is longer for IT Services but IT budget is likely to be stable. Some PES' verticals (Semiconductor, consumer electronics and handset business) are seeing some sign of weakness. However, other verticals are steady. In terms of verticals, there is a delay in commitment in BFSI, but manufacturing has a better outlook. In Europe, the company is seeing some cautionary delay from the customers, but no cut in IT budgets The management indicated Q4FY12 growth to be in-line with Q3FY12. Higher working days in Q4 compared to Q3 will offset weakness in PES. However, demand in IT Services continues to look stable. In Q3FY12, the company is likely to push utilization by 1-2%, giving room for margin expansion at constant currency."

"We expect steady performance from the company, both in terms of growth and margin expansion. We retain our 'BUY' rating, with a TP of Rs 550, 10x FY13e earnings estimate," says Prabhudas Lilladher research report.   

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