Hold MindTree; target Rs 440: KRChoksey

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Hold MindTree; target Rs 440: KRChoksey

KRChoksey has recommended hold rating on MindTree with a target price of Rs 440, in its October 17, 2011 research report.

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RELATED NEWS Buy ING Vysya Bank; target of Rs 479: Nirmal Bang Hold Torrent Pharma; target of Rs 618: Emkay Buy Persistent Systems; target of Rs 440: PLilladher ALSO READ See previous views by KRChoksey See what other Experts & Brokerages are saying about MindTree See messages about MindTree MindTree BSE | NSE 01/06/12 Are Mutual Funds betting on MindTree?

KRChoksey has recommended hold rating on MindTree with a target price of Rs 440, in its October 17, 2011 research report.

"MindTree, Volume growth of 6.1% QoQ was better than our expectation of 5.1% QoQ growth in Q2FY12. Better than expected growth was primarily led by continued strong momentum in European geography as against slowdown registered by peer sets. Billing rate increased by 3.4% QoQ supported by favorable change in service mix and one time USD1 mn revenue in Q2FY11; whereas we expected flat billing rate considering adverse cross-currency movement against US Dollar in Q2FY12. The realization rate remained more or less unchanged at Rs. 45.1/USD in Q2FY12 from Rs.44.7/USD in Q1FY12. Whereas, we had assumed realization rate of Rs. 46.4/USD in Q2FY12."

"The management has guided for slower revenue growth in Q3FY12 primarily due to lower number of working days (because of Christmas holiday), one time license revenue in Q2FY12 and pressure in demand from semi-conductor & consumer devices industries, which are part of Product Engineering Segment, due to global macro economy concerns. However, we believe the revenue growth in Indian Rupee terms will be stronger due to lower realized rate in Q2FY12. EBTIDA margin improved by 191 bps QoQ to 12.9% in Q2FY12 against our expectation of increase in margin by 79 bps QoQ despite lower realized rate than our expectation. Better than expected EBITDA margin improvement was led by onetime license revenue, operating leverage and significant improvement in utilization rate (excluding trainees) by 4.8% QoQ to 77.7% in Q2FY12."

"Considering, the company high exposure to non discretionary spend which will be adversely impacted in case global macro worsens further and recent run in stock price versus BSE IT index reflecting better than consensus performance, we recommend "HOLD" on the stock with a target price of Rs.440 by assigning multiple of 10 times (in line with other mid-size Indian IT companies) to its FY13E EPS of Rs. 44," says KRChoksey research report.

Non-Institutions holding more than 90% in Indian cos

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