Mindtree shares rally 4% on strong Q2 results. Here's what analysts say

Mindtree shares rally 4% on strong Q2 results. Here's what analysts say

September was seventh consecutive quarter of 5 per cent-plus sequential revenue growth for the IT major. Bengaluru-based IT firm's Ebit margin for the quarter beat analyst estimates while attrition also fell on a trailing twelve month basis.

Mindtree on Thursday reported a 27.5 per cent year-on-year (YoY) jump in consolidated net profit at Rs 508 crore compared with Rs 398 core reported in the corresponding quarter last year
Amit Mudgill
  • Oct 14, 2022,
  • Updated Oct 14, 2022, 9:52 AM IST

Investors gave thumbs up to Mindtree's September quarter results, sending its shares soaring 4 per cent in Friday's trade. September was seventh consecutive quarter of 5 per cent-plus sequential revenue growth for the IT major. Bengaluru-based IT firm's Ebit margin and constant currency (CC) revenue growth for the quarter beat analyst estimates while attrition also fell on a trailing twelve-month basis.  

Add to that was $518 million deal wins that lifted the H1 deal wins above $1 billion mark. All in all, Mindtree Q2 results were a beat across parameters, analysts said.

By 9.20 am, the scrip had jumped 3.59 per cent to hit a high of Rs 3,443 on BSE.

Many analysts however have 'hold' rating on the counter.

"The company reported a strong performance in the September quarter beating our estimates across all parameters. We expect strong revenues ahead with a better margin profile backed by a healthy deal pipeline, declining attrition rate and better pricing ahead. Considering strong deal pipeline, over 20 per cent margin territory, lower client concentration risk post-merger with LTI, at present we have 'hold' rating on the stock," Mitul Shah, Head of Research at Reliance Securities.

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The IT firm on Thursday reported a 27.5 per cent year-on-year (YoY) jump in consolidated net profit at Rs 508 crore compared with Rs 398 core reported in the corresponding quarter last year. Its consolidated revenue for the quarter rose 31.5 per cent YoY to Rs 3,400 crore from Rs 2,586 crore in the year-ago quarter. Dollar revenues jumped 5.7 per cent sequentially to $422.10 million.

Mindtree said it won eight key deals during the quarter. A leading financial institution in Europe selected it as its sole technology partner to accelerate digital transformation spanning data, process, and technology over the next four years, the company said in a BSE filing.

Motilal Oswal said it maintains a 'Neutral' rating on the stock due to its fair valuations, softness in Retail and constraints on management bandwidth because of its impending merger with Larsen & Toubro Infotech (LTI).

"Mindtree reported a better-than-expected 2QFY23, with revenue growth of 7.2 per cent QoQ in

CC terms (5.8 per cent our estimate), marking seventh consecutive quarter of 5 per cent-plus growth. The beat was driven by a strong performance by the BFSI and TTH verticals," said Nirmal Bang Institutional Equities.

Post the quarterly results, the brokerage has tweaked its target price to Rs 2,501.

"We maintain our ‘Sell’ rating. We fear that the Indian Tier-2 IT pack would suffer more because of vendor consolidation under the pressured revenue/profit picture for customers, a less diversified revenue mix, larger exposure to non-Global 1000 clientele and richer valuations," it said.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
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