Mindtree shares trade lower post Q4 results; should you buy now?

Shares of Bengaluru-based company Mindtree tanked over 3 per cent to hit an intraday low of Rs 3,858 in early trade after the company reported its earnings for the quarter ended March 2022. However, the stock opened 3 per cent higher at Rs 4,080.

With a market capitalisation of Rs 64,632 crore, the shares stand lower than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

The IT firm reported a 49 per cent year-on-year rise in consolidated net profit at Rs 473.1 crore for the quarter ending 31 March, 2022 on the back of robust demand and aggressive customer mining. The company had posted a net profit of Rs 317 crore in the same quarter last year.

The company saw its revenue grow 37 per cent to Rs 2,897 crore in the quarter under review from Rs 2,109 crore in the year-ago period.

In dollar terms, net profit rose nearly 45 per cent YoY to $62.7 million, while revenue increased 32.2 per cent to $383.8 million in the said quarter over the year-ago period.

The company also announced that that its board has recommended a final dividend of Rs 27 per share of face value of Rs 10 each for the financial year ended March 31, 2022. The final dividend is subject to the approval of shareholders at the 23rd Annual General Meeting.

IDBI Capital said that the company reported another set of healthy numbers in Q4FY22 and has maintained steady margins. Going forward, it sees broad based growth across geographies and verticals.

"In addition, the company’s focus on top 100 clients, healthy deal TCV of US$1.6 bn (+16.6% YoY in FY22), anticipated robust growth in 2-20 ( up 40% in FY22) & top client has made company confident of achieving Industry leading growth in FY23E. Hence, we have assumed CAGR growth of 18% over FY22-24E," the brokerage firm added.

It further added that the company is confident of achieving 20%+ EBITDA margins prompting us to build 18 per cent CAGR EBIT growth over FY22-24E. However, most of the positives are factored in the stock. This coupled with global challenges prompt us to maintain Hold rating on the stock with target price of Rs 4,275 (PER of 30x on FY24E EPS), it said.

"We expect sustained traction in Top account and improved outlook in BFSI/Travel vertical would translate into strong growth in FY23 as well, however margins may see some pressure given expected headwinds in terms of need for business investments, normalisation of discretionary costs and upcoming hiring (utilisation currently at unsustainable levels of 83%)," said Dolat Capital.

"We currently value Mindtree at 34x on FY24E EPS of Rs 122.1 with a target price of Rs 4,150 per share and maintain our Reduce rating on the stock," it added.