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MindTree reported a strong performance for 2QFY2012, with numbers ahead of
street as well as our expectations on all fronts. The company reported volume
growth of 6.1% qoq along with a 3.5% qoq increase in price realization.
MindTree has been one of the good performers on the revenue growth front in
the Indian IT mid-cap space, growing by a CQGR of 5.6% over the last six
quarters. We expect MindTree to continue its growth momentum at a 17.9%
CAGR in USD revenue over FY2011-13E. We recommend Buy on the stock.
Quarterly highlights: For 2QFY2012, MindTree reported USD revenue of
US$101.3mn, up 9.5% qoq. In INR terms, revenue came in at `456.7cr, up
10.6% qoq. The company’s EBITDA margin increased by 174bp qoq to 12.9%;
factors affecting EBITDA margin were 1) 440bp qoq positive gain on account of
operational efficiency, 2) 40bp gain due to INR depreciation and 3) 320bp
negative impact due to wage hikes given to 24% of the employee base. PAT came
in at `54cr, aided by higher other income.
Outlook and valuation: MindTree has its IT services business (~64% of revenue)
coming in from growth verticals such as BFSI, manufacturing and travel and
transportation (T&T). Management is confident that its IT services business would
continue its growth momentum and has planned to hire 4,000 people (~2,000
freshers) overall. We expect the company to record a 17.9% and 18.4% CAGR in
USD and INR revenue, respectively, over FY2011–13E. MindTree has adequate
amount of margin levers such as 1) improving utilization level on the back of
volumes expected, 2) employee pyramid rationalization, 3) business growth even
with a marginal increase in SGA on an absolute basis and 4) effort shift towards
offshore to improve margin profile from 11.8% in FY2011 to 13.7% in FY2012E
and 14.4% in FY2013E. We expect the company to record a 30.8% and 34.8%
CAGR in EBITDA and PAT over FY2011-13E, respectively. We value the stock at
10x FY2013 EPS i.e., with a target price of `462, and recommend Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
MindTree reported a strong performance for 2QFY2012, with numbers ahead of
street as well as our expectations on all fronts. The company reported volume
growth of 6.1% qoq along with a 3.5% qoq increase in price realization.
MindTree has been one of the good performers on the revenue growth front in
the Indian IT mid-cap space, growing by a CQGR of 5.6% over the last six
quarters. We expect MindTree to continue its growth momentum at a 17.9%
CAGR in USD revenue over FY2011-13E. We recommend Buy on the stock.
Quarterly highlights: For 2QFY2012, MindTree reported USD revenue of
US$101.3mn, up 9.5% qoq. In INR terms, revenue came in at `456.7cr, up
10.6% qoq. The company’s EBITDA margin increased by 174bp qoq to 12.9%;
factors affecting EBITDA margin were 1) 440bp qoq positive gain on account of
operational efficiency, 2) 40bp gain due to INR depreciation and 3) 320bp
negative impact due to wage hikes given to 24% of the employee base. PAT came
in at `54cr, aided by higher other income.
Outlook and valuation: MindTree has its IT services business (~64% of revenue)
coming in from growth verticals such as BFSI, manufacturing and travel and
transportation (T&T). Management is confident that its IT services business would
continue its growth momentum and has planned to hire 4,000 people (~2,000
freshers) overall. We expect the company to record a 17.9% and 18.4% CAGR in
USD and INR revenue, respectively, over FY2011–13E. MindTree has adequate
amount of margin levers such as 1) improving utilization level on the back of
volumes expected, 2) employee pyramid rationalization, 3) business growth even
with a marginal increase in SGA on an absolute basis and 4) effort shift towards
offshore to improve margin profile from 11.8% in FY2011 to 13.7% in FY2012E
and 14.4% in FY2013E. We expect the company to record a 30.8% and 34.8%
CAGR in EBITDA and PAT over FY2011-13E, respectively. We value the stock at
10x FY2013 EPS i.e., with a target price of `462, and recommend Buy.
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