Motilal Oswal recommended Neutral rating on Mindtree with a target price of Rs 1550 in its research report dated October 16, 2020.
Motilal Oswal 's research report on Mindtree
Mindtree’s revenue growth (2.1% QoQ CC) was largely in-line. Margin expansion of 160bp QoQ was a surprise. Management commentary to sustain margin despite wage hikes, seasonal impact, and the possibility of transient tailwind factors (such as lower attrition and travel costs) gradually waning out are encouraging. Deal wins (USD303m) were reasonably stable, and the deal pipeline remains healthy. The strategy refresh – involving a revamped GTM strategy, shift to annuity deals, operational efficiency, and tail account rationalization has shown results in terms of margin expansion and increased annuity deals, which have been positives.
We marginally upgrade our FY21/FY22 EPS estimates by 4%/3% as we adjust our revenue/margin trajectory with the margin surprise. The stock is trading at 21x FY22 EPS. The stock has been one of the best performers in CY20 in the IT sector, with returns of 77% YTD. We believe the key positives are already captured and see limited upside hereafter. Our TP implies 22x FY22 EPS. Downgrade to Neutral.
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