Hold MindTree; target of Rs 453: PINC Research

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Hold MindTree; target of Rs 453: PINC Research

PINC Research has maintained hold rating on MindTree with a target price of Rs 453 in its October 18, 2011 research report.

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PINC Research has maintained hold rating on MindTree with a target price of Rs 453 in its October 18, 2011 research report.

"MindTree's revenue grew 10.6%QoQ to Rs 4,567mn, higherthan- expectation with strong traction in both IT Services & Product Engineering. Higher forex gain and one-time high other income led to PAT growth of 58.0%QoQ to Rs 545mn. EPS was Rs 13.4 better than street estimates of Rs 8. In dollar terms, IT services revenue grew 10.1%QoQ and PE services grew 8.6%QoQ. Overall revenue increased 9.5%QoQ with volume growth of 5.9%QoQ and strong pricing increase of 3.5%QoQ. EBITDA margin improved 174bpsQoQ to 12.9% higher than expectation due to rupee depreciation, better utilisation, phased salary hike and pricing increase. Margin for PE services increased 328bpsQoQ to 10.4% whereas IT Services had a slight margin improvement of 77bps to 14.2%."

"Mindtree saw broad based growth across service offerings. IMS (9.7% revenue contribution) grew 11.8%QoQ, Consulting (4.6% revenue contribution) grew strongly 26%QoQ & Package Implementation (3.1% revenue contribution) grew 17.1%QoQ. Europe led the growth for fifth straight quarter and its revenue grew 23.5%QoQ. US with 58.4% revenue contribution grew 6.1%QoQ. Manufacturing led the growth among verticals with 11.7%QoQ & others (media, retail & services) grew 15.1%QoQ. Attrition rate declined substantially to 21.7% (LTM) from 25.6% in Q1. Highest ever quarterly net addition of 1,003 taking the total headcount to 10,580. Utilisation rate (exc. trainees) increased to 77.7% (+480bpsQoQ). Top 5 clients grew by 23.2% and 15 clients were added during the quarter."

"Q2 performance has been good with margin trend upwards and revenue momentum maintained. Management has guided for weak revenue growth in Q3 due to seasonality but profitability will be better due to rupee depreciation and improved employee pyramid. We have revised currency to 47 and 46.5 for FY12E and FY13E and increased earnings estimates by 14% for FY12 and FY13. Maintain 'HOLD' recommendation on the stock with a target price of Rs 453 based on 10x FY13E EPS," says PINC Research report.

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To read the full report click on the attachment