What should investors do with Mindtree post Q3 earnings: Buy, sell or hold?

BFSI (banking, financial services, insurance) segment registered 4.2 percent sequential growth; communications, media & technology 6.1 percent; and travel, transportation & hospitality 7.4 percent for the December 2021 quarter, while healthcare segment clocked a massive 29.2 percent during the quarter compared to previous quarter.

".... continued positive revenue momentum through the third quarter of FY22 on the back of robust demand, aggressive customer mining, and end-to-end digital transformation capabilities," said Debashis Chatterjee, Chief Executive Officer and Managing Director of Mindtree.

Revenue from operations grew 5.2 percent sequentially in constant currency. "This reflects the strength of strategy, execution, partnerships, and continued investments in our business and people," said Debashis.

Mindtree recorded order book for the quarter $358 million, up 14.6 percent YoY, and year-to-date deal total contract value (TCV) crossed $1.2 billion," he added.

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Here is what brokerages have to say about the stock and the company post December quarter earnings:

Morgan Stanley

Morgan Stanley has maintained equal-weight rating on the stock with a target at Rs 5,100.

The demand environment is strong, while valuation premium to large caps makes risk-reward balanced.

Any near-term volatility in stock could provide a better entry point.

Nomura

Research house has kept neutral call and raised target price to Rs 4,640 from Rs 4,480 and also raised FY22-24F EPS estimates by 4-5%.

The strong execution drives healthy revenue growth, client metrics tracking in the right direction, while the deal wins were sluggish; growth made up by smaller projects.

Citi

Broking firm has kept sell call on the stock with a target at Rs 3,650 as the revenue was below expectations, while margins were ahead on expectation.

The deal TCV largely was in-line with average of past 4 quarters.

Citi has revised FY22 EPS by 3% due to higher Q3 profit.

Goldman Sachs

The foreign broking house Goldman Sachs has maintained sell rating with a target at Rs 4,117 on the back of above expectations on margins, with in-line revenue & order book.

The primary reason for margin beat was lower employee cost.

The company reiterated strong double-digit industry leading revenue growth in FY22.

Prabhudas Lilladher

Mindree reported healthy deal TCV of USD $358 mn, +14.6% YoY, flattish QoQ despite weak seasonality. It won 10 cloud deals this quarter on back of expanded partnership with one of the hyperscalars. Demand continues to be strong with increasing number of deals coming with large tail of growth

Our EPS estimates has increased by 3.7%/1.5%/0.4% in FY22/23/24 led by slight increase in margin estimates.

We raise our DCF based target price to Rs 5,249 from earlier Rs 5,141.

Motilal Oswal

The management’s increased focus on annuity revenue and strategic accounts is reflected in its revenue and client mix.

A strong outlook on strategic accounts, decent deal signings, and the ability to sustain improved margin are key positives.

As the key positives are already captured, we see limited upside hereafter. Our target price of Rs 4,880 per share implies 35x FY24E EPS. We maintain our neutral rating.

At 09:17 hrs Mindtree was quoting at Rs 4,496.55, down Rs 247.25, or 5.21 percent on the BSE.

The share touched a 52-week high of Rs 5,059.15 and a 52-week low of Rs 1,539.85 on 18 November, 2021 and 24 February, 2021, respectively.

Currently, it is trading 11.12 percent below its 52-week high and 192.01 percent above its 52-week low.

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