Mindtree shares fell over 2.6 per cent to Rs 3,858 apiece on BSE on Tuesday, erasing opening gains even as the IT company’s Q4 results met analysts’ expectations. The stock opened at Rs 4,080 apiece, up 3 per cent from previous close. Mindtree posted a consolidated net profit of Rs 1,652.9 crore, up 48.84% from Rs 1,110.5 crore recorded during the year-ago period. Research and brokerage firms have mixed views on Mindtree stock after the company released fourth quarter earnings. The stock has fallen 8.6 per cent in five days, 18 per cent in six months, and 19.4 per cent so far in the calendar year 2022.
Mindtree stock talk: Should you buy, sell or hold?
ICICI Securities
Rating Hold; Target price: Rs 4,167; Upside potential: 8%
ICICI Securities expects Mindtree to continue to deliver industry leading growth along with a strong operating performance in FY23E as well. The brokerage firm said that it was impressed by Mindtree’s consistency and disciplined execution on profitability, and believe it is moving from discrete initiatives to transformation at scale which increases cross-selling opportunities with clients. It valued Mindtree at 32x on FY24E EPS of Rs 130 to arrive at a target price of
Rs 4,167, and maintain its ‘hold’ rating.
Kotak Institutional Equities
Rating: Sell; Target price: Rs 3,580; Downside potential: 7.2%
Mindtree saw in-line revenue growth but beat Kotak Institutional Equities estimates on margins. The brokerage firm said that after a strong FY2022, Mindtree is gunning for industry leading growth in FY2023E. The company is positioning itself as a comprehensive digital transformation partner, a lofty ambition. Transition to a full-service model entails considerable execution risk. It maintained ‘sell’ with a revised fair value of Rs 3,580 (from Rs 3,475 earlier).
Nirmal Bang
Rating: Sell; Target Price: Rs 3,120; Downside potential: 19.2%
Nirmal Bang believes that tighter spending may lead to some recalibration of digital spends and affect demand in 2HFY23/FY24. Unlike Tier-1 companies, Mindtree did not indicate any decline in absolute attrition, but Nirmal Bang believes that the aggressive fresher hiring will help in stabilising attrition along with ensuring capacity for a robust demand pipeline. Post 4QFY22, its estimates remain almost unchanged for FY23E/FY24E. The firm kept the target price of Rs 3,120 (21.8x March‘24E EPS unchanged, which is 10% discount to that of TCS’ target multiple). It maintained a ‘sell’ rating.
Motilal Oswal Financial Services
Rating: Neutral; Target Price: Rs 4,230; Upside potential: 9.6%
Motilal Oswal Financial Services said that 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. The stock is currently trading at 28x FY24E EPS. As the key positives are already captured, the research and brokerage firm sees limited upside hereafter. Its target price of Rs 4,230 per share implies 30x FY24E EPS. It maintained a ‘neutral’ rating.
Yes Securities
Rating: Add; Target price: 4,507; Upside potential: 16.8%
Yes Securities said that robust deal booking provides strong revenue visibility. It added that attrition remained high but expected to stabilise over next 6 months. Client mining strategy of upselling and cross selling among top clients continued to serve it well. The research firm expects certain costs related to travel and admin to come back as IT companies switch to hybrid mode of working. However, improving employing pyramid, positive operating leverage and the efficiency measures should help to broadly maintain stable margin going ahead. It estimated revenue CAGR of 17.4% over FY22‐24E with average EBIT margin of 17.6%. High revenue concentration from top clients at 24.9% remains a risk factor. It maintained ‘add’ rating on the stock with revised target price of Rs 4507, valuing the stock at 34x on FY24E EPS.
The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.
