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http://www.icicidirect.com/mailimages/ICICIdirect_MindTree_Q4FY12.pdf
G o o d q u a r t e r ; u p g r a d i n g t o B U Y … .
MindTree reported Q4 revenue/earnings in line/above our estimates,
respectively. US$ revenues grew 1.2% QoQ vs. our 0.9% QoQ growth
estimate while rupee revenues came in line with 1.2% QoQ growth
estimate. Sequentially, product engineering services revenues were flat led
by ramp-downs on discretionary spends for technology customers while
financial services dragged down IT services growth. Management expects
to beat FY13E industry average (11-14% Nasscom guidance) growth led by
discretionary services demand pick-up in back-half of the year. Noticeably,
Q1, Q2 could be muted led by decision making delays for financial services
customers & discretionary projects. This was precisely our argument for
HOLD rating earlier & likely gets priced in subsequent to management
commentary. Consequently, we raise MindTree to BUY applying 1x PE/G on
FY13E earnings growth of 10%.
ƒ Earning summary
MindTree reported Q4FY12 revenues of | 526 crore (34.4% YoY and
1.2% QoQ growth) in line with our | 526 crore estimate. EBITDA of
| 98.5 crore was above our | 88.8 crore estimate led by lower COS.
Employee cost declined 1.9% QoQ to | 318 crore vs. ~| 324 crore in
Q3. The company earned diluted EPS of | 16.8 above our | 13.3
estimate aided by lower taxes (| 13.6 crore vs. our | 16.8 crore
estimate). IT services revenues grew 1.7% QoQ with 119 bps EBITDA
margin expansion while PES revenues were flat QoQ with 202 bps
EBITDA margin expansion. The consolidated EBITDA margin
expanded 148/897 bps QoQ/YoY, respectively.
V a l u a t i o n
We expect FY13E US$ revenues to grow 11.3% while rupee revenue/EPS
could grow 17.9%/10.3%, respectively. We also introduce FY14E estimates
& expect revenue/EPS to grow 9.8%/9.9%, respectively, which translates to
revenue/EPS CAGR of ~13%/27% in FY11-14E. Employee cost
rationalisation led by replacing of high cost staff with freshers could lead to
EBITDA margins expanding 72 bps in FY13E. We change our valuation
methodology and now value MindTree based on CY13E EPS estimate. We
have valued MindTree at | 591, i.e. at 10x our CY13E EPS estimate of | 59.1
and have changed our rating to BUY vs. HOLD earlier.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.icicidirect.com/mailimages/ICICIdirect_MindTree_Q4FY12.pdf
G o o d q u a r t e r ; u p g r a d i n g t o B U Y … .
MindTree reported Q4 revenue/earnings in line/above our estimates,
respectively. US$ revenues grew 1.2% QoQ vs. our 0.9% QoQ growth
estimate while rupee revenues came in line with 1.2% QoQ growth
estimate. Sequentially, product engineering services revenues were flat led
by ramp-downs on discretionary spends for technology customers while
financial services dragged down IT services growth. Management expects
to beat FY13E industry average (11-14% Nasscom guidance) growth led by
discretionary services demand pick-up in back-half of the year. Noticeably,
Q1, Q2 could be muted led by decision making delays for financial services
customers & discretionary projects. This was precisely our argument for
HOLD rating earlier & likely gets priced in subsequent to management
commentary. Consequently, we raise MindTree to BUY applying 1x PE/G on
FY13E earnings growth of 10%.
ƒ Earning summary
MindTree reported Q4FY12 revenues of | 526 crore (34.4% YoY and
1.2% QoQ growth) in line with our | 526 crore estimate. EBITDA of
| 98.5 crore was above our | 88.8 crore estimate led by lower COS.
Employee cost declined 1.9% QoQ to | 318 crore vs. ~| 324 crore in
Q3. The company earned diluted EPS of | 16.8 above our | 13.3
estimate aided by lower taxes (| 13.6 crore vs. our | 16.8 crore
estimate). IT services revenues grew 1.7% QoQ with 119 bps EBITDA
margin expansion while PES revenues were flat QoQ with 202 bps
EBITDA margin expansion. The consolidated EBITDA margin
expanded 148/897 bps QoQ/YoY, respectively.
V a l u a t i o n
We expect FY13E US$ revenues to grow 11.3% while rupee revenue/EPS
could grow 17.9%/10.3%, respectively. We also introduce FY14E estimates
& expect revenue/EPS to grow 9.8%/9.9%, respectively, which translates to
revenue/EPS CAGR of ~13%/27% in FY11-14E. Employee cost
rationalisation led by replacing of high cost staff with freshers could lead to
EBITDA margins expanding 72 bps in FY13E. We change our valuation
methodology and now value MindTree based on CY13E EPS estimate. We
have valued MindTree at | 591, i.e. at 10x our CY13E EPS estimate of | 59.1
and have changed our rating to BUY vs. HOLD earlier.
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