Buy MindTree; target of Rs 700: PLilladher

Prabhudas Lilladher is bullish on MindTree and has recommended buy rating on the stock with a target of Rs 700 in its July 16, 2012 research report.

“MindTree (MTCL) reported another quarter of top-line growth touch-below our/consensus expectation, whereas, margin expansion was ahead of expectation. This is the fifth consecutive quarter of positive surprise on margin. We believe that continued focus on margin improvement, along with steady revenue growth, would shield the downside risk. We reiterate our ‘BUY’ rating, with a revised TP of Rs700.”

“MTCL reported Q1FY13 results ahead of expectation. Revenue growth was 7.1% QoQ at Rs5.63bn (PLe: Rs5.73bn, Cons: Rs5.67bn) in INR terms and grew by 0.4% (@cc 1.2%) QoQ in USD terms to $105.5m (PLe: US$106.1m). EBITDA margin expanded by 212bps QoQ to 20.9% (PLe: 21% Cons: 19.6%) aided by currency depreciation and operational efficiency. EPS grew by 29.2% QoQ to Rs22.01 (PLe: Rs19.86, Cons: Rs19.24). Management was confident of achieving growth in NASSCOM guided range of 11-14%. However, in order to achieve the upper end of NASSCOM guidance, MTCL needs to achieve a quarterly run-rate of ~5.7% for Q2-Q4FY13. We believe that achieving 5%+ quarterly growth over the next three quarters would be a tough task to achieve as the increased macro uncertainty would further blur the deal visibility. However, the management was confident of achieving the growth target as they expect PES to grow 0-5%, while, IT services to grow ~15%. The deal pipeline and stable clients’ outlook gives confidence to the management for the same. Management has guided for stable margin despite ~200bps headwinds due to full impact of wage hike. The continued drive to improve operational efficiency, utilization as margin lever, along with rationalization of pyramid, would help the company to retain margin despite headwinds. We see stable margin for the company in FY13.”

“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 700, 10x FY13e earnings estimate,” says Prabhudas Lilladher research report.   

FIIs holding more than 30% in Indian cos  

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.

To read the full report click on the attachment

Read More