What are brokerages' views on Mindtree shares following Q4 earnings?

Mindtree's has reported revenue growth for the fifth consecutive quarter in Q4FY22. Currently, the stock is trading around ₹3696.10, up by 1.69% from its previous close on the BSE.

The company reported strong revenue growth of 5.4% QoQ and stood at ₹2,897 Cr in Q4FY22, reporting revenue growth of 49.1% YoY. It posted operating profits of ₹608 Cr, registering a growth of 2.7% QoQ.

While its operating margins fell by 50 basis points QoQ to 21%, its net profit for Q4FY22 was ₹473 Cr, up 49% year on year and 8.1% quarter on quarter.

On the vertical front, the BFSI vertical grew by 8.9% QoQ, but retail manufacturing and CPG de-grew by 2.4% QoQ. Travel & Hospitality reported growth of 9.2% QoQ. 

Brokerages were bullish on the stock. Axis Securities says, "The majority of the remaining verticals witnessed a strong recovery during the quarter and they are expected to continue their growth trajectory in the forthcoming quarters considering the strong deal pipeline in place."

On the geographical front, North America (73% of revenue) posted growth of 5.6% QoQ, while Europe (20% of revenue) advanced by 5.8% QoQ. APAC or ROW businesses (7% of revenue) grew by 8.9% QoQ in CC terms. The company’s DSO days have been reduced to 60 days from 64 days in QoQ.

Axis Securities believes Mindtree enjoys a resilient business structure and has a proven track record of strong and efficient execution capabilities. With depreciation in INR, lower travel costs, and lower on-site expenses, EBITDA margins are likely to expand in the near term, it added.

It recommends a 'buy' on the stock and assigns a 35x P/E multiple to its FY24E earnings of ₹135.8/share to arrive at a TP of ₹4,830/share, implying an upside potential of 22% from the CMP.

ICICI Securities on the other hand forecasted MTCL to post strong revenue growth of 22%–16% with an EBITDA margin of 20%–20.2% for FY23/24E. Margin estimates have an upside risk. In their view, MTCL will likely continue to deliver industry-leading growth along with strong operational performance in FY23E as well.

ICICI Securities said, "It was impressed by MTCL’s consistency and disciplined execution on profitability and believed it was moving from discrete initiatives to transformation at scale, which would increase cross-selling opportunities with clients. MTCL is valued at 32x on FY24E EPS of Rs130 to arrive at a TP of Rs4,167. "Maintain HOLD," says ICICI Securities.

Meanwhile, HDFC Securities anticipates that MTCL will deliver a high-teens CAGR (reaching USD 2 billion annual rate by H2FY24E), supported by expansion into Continental Europe and core portfolio focus (cross-sell), with predictable margins (management maintains a 20%+ EBITDAM outlook). It keeps its ADD rating and a target price of INR 4,855, valuing MTCL at 35x FY24E EPS (20% higher than the 3Y average).

Stock Performance

Mindtree's stock has risen 81 percent in the last year, compared to a 22 percent rise in the S&P BSE Sensex, and it has risen 282 percent in the last three years.

Further, over the past five years, the market price of the stock has zoomed by 737 per cent, as compared to a 105 per cent surge in the Sensex.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie