Mindtree shares fell as much as 5.6 percent to Rs 4,477.3 on BSE in early deals on Friday, a day after the IT company reported its financial results for the December quarter. Post-market hours on Thursday, the company reported a 9.7 percent sequential rise in quarterly net profit to Rs 437.5 crore, exceeding Street estimates.
At 9:30 am, Mindtree shares were down 4.6 percent at Rs 4,526.6.
However, its revenue, though up 6.3 percent on a quarter-on-quarter basis, failed to meet analysts' forecasts. Mindtree's revenue came in at Rs 2,750 crore for the October-December period.
Analysts in a CNBC-TV18 poll had estimated the IT company to report a quarterly net profit of Rs 430 crore over revenue of Rs 2,760 crore.
Revenue in dollar terms increased 4.7 percent sequentially to $366.4 million. Analysts in the CNBC-TV18 poll had estimated the revenue at $368 million.
The company reported Rs 528.9 crore in earnings before interest and taxes (EBIT), as against the Street estimate of Rs 500 crore. Its EBIT margin came in at 19.2 percent in Q3, as against 18.2 percent in Q2. Analysts had expected a margin of 18.2 percent.
The overall demand is robust for Mindtree, driven by its digital business, said CEO Debashis Chatterjee said in an interview to CNBC-TV18. He said the company will endeavour to have industry leading profitable growth in FY23 as well.
"The overall demand scenario is fairly in line with the way we have organised with respect to our service lines and capabilities... Clients have accelerated their digital journeys... The digital transformation also gives us confidence that we are in the right place in terms of catering to the demand given the capabilities that we have built," he added.
What brokerages say
Goldman Sachs maintained a 'sell' rating on the Mindtree stock with a target price of Rs 4,117. The brokerage said the primary reason for the company's beat on the margin front was lower employee costs.
Morgan Stanley retained an 'equal-weight' rating on Mindtree with a target price of Rs 5,100. The valuation premium to large-caps balances the risk-reward, it added.
Citi continued with a 'sell' rating on Mindtree with a target price of Rs 3,650. Though the company's quarterly revenue was below expectations, its margin was ahead, the brokerage said. Citi revised its FY22 earnings per share (EPS) estimate for Mindtree by three percent to take into account the higher Q3 profit.
Nomura maintained a 'neutral' rating on Mindtree but raised its target price to Rs 4,640 from Rs 4,480. It raised its FY22-24 EPS estimates for Mindtree by 4-5 percent.