Mindtree share price hits 52-week high after Q1 results; Should you buy, sell or hold?

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Mindtree share price hit a 52-week high after it reported better than estimated earnings for the first quarter of fiscal 2021 with the highest ever order book of over $500 million.

Mindtree share price hits 52-week high after Q1 results; Should you buy, sell or hold?
Shares of Mindtree rallied over nine percent to hit a fresh 52-week high of Rs 2,725 on the BSE on Wednesday after the IT services company reported better than estimated earnings for the June quarter.
The company’s Q1FY22 net profit rose 8.2 percent to Rs 343.4 crore as compared to Rs 317.3 crore in the previous quarter. Net profit growth on a year-on-year basis was 61.2 percent. It also recorded the highest ever order book of over $500 million.
Revenue increased 8.6 percent sequentially to Rs 2,291.7 crore, while revenue in dollar terms increased 7.7 percent to $310.5 million.
At the operational level, EBIT during the quarter rose 3.8 percent QoQ to Rs 406.3 crore, while EBIT margin contracted by 90 bps to 17.7 percent from 18.6 percent, QoQ.
“The highest ever order book of $504 million affirms that the focused execution of strategy and client-centricity in re-imagining business models for the digital era is helping us drive profitable and sustainable growth,” said Debashis Chatterjee, Chief Executive Officer and Managing Director at Mindtree.
Here's what brokerages have to say on Mindtree stock and Q1 earnings:
Goldman Sachs
Goldman Sachs maintained a ‘buy’ call on the stock with a target price of Rs 2,863 per share. It expects 20.5 percent currency revenue growth for the company in FY22.
Strong dollar revenue growth of 7.7 percent was led by broad-based growth across verticals, it said.
Citi
Citi maintained a ‘sell’ call on the stock and raised the target price to Rs 2,215 per share. It revised estimates by 2-3 percent and raised multiple to 27x.
The company reported good Q1, revenue was ahead, EBITDA was in line and there were healthy bookings. However, cash-flow generation was weak. Client concentration and risk to margins are the keys. Valuations appear rich at current levels, Citi said.
Morgan Stanley
Morgan Stanley believes the company’s revenue growth and margin were stronger than expected. A broadening growth profile and improving revenue visibility augur well. High multiples and limited EPS estimate upgrades limit absolute upside, the brokerage said.
It maintained an ‘overweight’ rating with a target price of Rs 2,800 per share.
Motilal Oswal
A stable outlook for the top account, decent deal signings, and the ability to sustain improved margin are key positives. The stock is trading at 25x FY23E EPS. It has been one of the best performers in the IT sector in the last year, with returns of 155 percent. The key positives are already captured, and we see limited upside hereafter, Motilal Oswal said.
The brokerage maintained a ‘neutral’ rating on the stock and a target of Rs 2,620 per share.
ICICI Securities
Revenue growth in Q1FY22 was largely in line with our estimates. However, the quality of growth was weaker than usual. We factor in sales growth of 20 percent YoY (CC) in FY22 partly aided by the low base effect of FY21, ICICI Securities said.
Investor focus will likely shift to steady-state growth/margins in FY23 and ahead. At 28x FY23E EPS, the street is already factoring in mid-teens revenue growth with a 20 percent+ EBITDA margin over the medium term. Scope for further surprises/upgrades are less likely, it added.
The brokerage maintained a ‘hold’ rating and raised the target to Rs 2,375 from Rs 2,173 earlier.
At 10:00 am, the shares of Mindtree were trading 7.88 percent higher at Rs 2,691.30 apiece on the BSE.
(Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.)

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