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Mindtree 4QFY2014 performance highlights and results update

April 21, 2014, Monday, 16:11 GMT | 11:11 EST | 19:41 IST | 22:11 SGT
Contributed by Angel Broking

For 4QFY2014, Mindtree’s revenue and PAT came largely in line with our expectations, while the operating margin came in ahead of our expectations. During the quarter, the company signed deals of TCV of ~US$133mn, including renewals and new wins. This follows deals of TCV of ~US$540mn signed in the past four quarters. We recommend a Buy rating on the stock.

Quarterly highlights: For 4QFY2014, Mindtree reported a USD revenue growth of 4.4% qoq to US$133mn, on the back of 2.2% qoq volume growth and 2.3% qoq uptick in blended pricing. In INR terms, the revenue came in at Rs.824cr, up 4.2% qoq. The EBITDA and EBIT margin of the company increased by 200bp and 192bp qoq to 21.5% and 18.8%, respectively, led by increase in offshore realization and decline in non-manpower costs. The PAT came in at Rs.98cr, up 11% qoq.

Outlook and valuation: The Management reiterated that FY2015 will turn out to be a better growth year as compared to FY2014 because of pick up in client spending and as a result of the company’s greater concentration on mining its focus clients. The company has expanded its client mining focus to top-30 clients from top-10 earlier and has done aggressive investments with it appointing an additional sales team. We expect Mindtree to stay ahead of its peers in terms of revenue growth, keeping in notice strong growth in its top accounts, ability to cross-sell services, its diversified portfolio mix and consistent wins against stronger players. Overall, we expect the company to record a 13.5% and 14.0% CAGR in USD and INR revenue, respectively, over FY2014-16E. We expect the company to record an 11.3% and 12.1% CAGR in its EBIT and PAT respectively over FY2014-16E. We value the stock at 12x FY2016E EPS, translating into a target price of Rs.1,620, and recommend a Buy rating on the stock.