Buy MindTree Ltd For Target Rs.4915 - ICICI Direct
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Strong numbers, rich valuations…
About the stock: Mindtree Ltd (Mindtree) is a mid-tier IT company with a presence in the US, Europe & RoW catering to BFSI, communication media & technology, retail & travel.
* Expertise in infrastructure & application catering to Global 2000 clients
* Leading margins (>20%) compared to mid-tier IT companies
Q2FY22 Results: Mindtree reported robust Q2FY22 results.
* US$ revenues increased 12.8% QoQ to US$350 million
* EBITDA margin saw a 140 bps impact on account of wage hike
* Attrition has gone up 400 bps QoQ to 17.7%
What should investors do? Mindtree’s share price has grown by ~10x over the past five years (from ~| 452 in October 2016 to ~| 4693 levels in October 2021)
* We maintain HOLD rating on the stock
Target Price and Valuation: We value Mindtree at | 4,915 i.e. 45x P/E on FY23E
Key triggers for future price performance:
* Key beneficiary of robust growth in cloud, data and experience
* Traction in multi-year deals client mining, scaling up existing clients to US$50 million
* Well poised to clock industry leading double digit growth
* Well poised to maintain 20% plus margins
Alternate Stock Idea: Apart from Mindtree, in our IT coverage we also like LTI.
* Larsen & Toubro Infotech’s (LTI) ability to deliver end-to-end solutions is expected to help in registering industry leading growth
* BUY with a target price of | 6.599
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