Motilal Oswal's research report on Mindtree
We attended MTCL’s annual investor meet, where the management reiterated its strong demand outlook and detailed the six strategic levers for FY23. It sees scope for continued performance in their 4x4x4 strategy and investments required to boost long-term growth. Here are the key highlights from the meet: The demand outlook for the industry continues to remain strong. It has not seen any slowdown due to the recent inflationary concerns. This, aided by the ongoing shift of spends to Cloud-based migration from legacy, will help reallocate its technology expenses. While there is still pressure on the supply-side due to lower fresher additions over the last few years, MTCL is not worried as demand is sufficient to absorb the cost pressures. The management reiterated its plan to maintain EBITDA margin ~20% and reinvest any savings in accelerating business growth. The company introduced its six strategic levers for FY23, which they expect to boost their positioning. These are: a) full stack account, b) reimagine the ecosystem, c) shift from run IT to product IT ops, d) edge to experience for Industry X.0, e) enable industry convergence, and f) next-gen delivery capabilities for integrated solutions. It also reiterated its 4x4x4 strategy (four industry groups, four service lines, and four geographies). It continues to see opportunities across industries and services. Including the evolving Healthcare vertical as the fifth industry unit, MTCL is seeing an increased trend of clients operating across industry lines and sees convergence as a key theme going forward. Travel and Hospitality vertical continues to gain from the normalization theme. It is seeing strong spend interest from clients in this vertical.
The stock is currently trading at 27x FY24E EPS. With a strong performance (+136%) in the last one-year, the key positives are already captured in the valuation. We see limited upside hereafter. Our TP stands at INR4,050/share, implying 29x FY24E EPS. We maintain our Neutral rating.
At 13:29 hrs Mindtree was quoting at Rs 3,601.80, down Rs 196.85, or 5.18 percent.
It has touched an intraday high of Rs 3,720.00 and an intraday low of Rs 3,590.00.
It was trading with volumes of 30,681 shares, compared to its thirty day average of 51,480 shares, a decrease of -40.40 percent.
In the previous trading session, the share closed down 0.70 percent or Rs 26.65 at Rs 3,798.65.
The share touched its 52-week high Rs 5,059.15 and 52-week low Rs 1,539.85 on 18 November, 2021 and 24 February, 2021, respectively.
Currently, it is trading 28.81 percent below its 52-week high and 133.91 percent above its 52-week low.
Market capitalisation stands at Rs 59,367.97 crore.
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