Midcap IT shares in demand; Happiest Minds, MphasiS rally over 5%

Shares of midcap information technology (IT) companies were in demand on Wednesday and rallied upto 9 per cent on the BSE in intra-day trade, after Mindtree reported a healthy set of numbers for the quarter ended June 2021 (Q1FY22). Meanwhile, Infosys is scheduled to announce its Q1 results later in the day, while the board of Wipro will meet on Thursday to consider June quarter earnings, as per stock exchange information.

Shares of Mindtree surged 9 per cent to hit a new high of Rs 2,725 in intra-day trade, after the company reported a net profit of Rs 343.4 crore for Q1FY22, an increase of 61.2 per cent year-on-year (YoY). Sequentially, profits grew 8.2 per cent. Broad-based growth across verticals and geographies saw the company’s revenue rise by 20.1 per cent YoY at Rs 2,291.7 crore for the quarter. Quarter-on-quarter (QoQ), the company’s revenue was up 8.6 per cent. In dollar terms, Mindtree’s revenue grew 7.7 per cent sequentially and profit was up by 7.5 per cent.

Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin was at 20.3 per cent, down 166 basis points (bps) QoQ, mainly led by headcount addition. The deal pipeline increased 34.2 per cent QoQ (up 28.9 per cent YoY) to US$504 million. The company added 3,442 employees in the quarter. Offshore effort mix increased 60 bps QoQ to 83.5 per cent.

Since July 2019, after the disruption due to the ownership change, Mindtree has taken steps to stabilize its client and employee count. The management’s increased focus on annuity revenue and tail account rationalization is already reflected in revenue and client mix. A stable outlook for the top account, decent deal signings, and the ability to sustain improved margin are key positives, Motilal Oswal Securities said in result update note.

Among the other individual stocks, Happiest Minds Technologies hit a new high of Rs 1,299, and rallied 9 per cent on the BSE. MphasiS surged 5 per cent to Rs 2,308, followed by Coforge (5 per cent at Rs 4,517), Larsen & Toubro Infotech (4 per cent at Rs 4,165), Wipro (4 per cent at Rs 546.45) and Zensar Technologies (3.6 per cent at Rs 346).

L&T Technology Services, HCL Technologies, Tech Mahindra, Persistent Systems, NIIT and Infosys were up between 1 per cent and 3 per cent on the BSE. At 11:41 am; the S&P BSE IT index and Nifty IT indices were up 2 per cent each, as compared to 0.14 per cent gain in the benchmark indices the S&P BSE Sensex and Nifty50.

Analysts expect strong deal momentum, seasonality factor and traction in cloud to drive Infosys' performance in Q1FY22. They peg bottomline growth at 27-30 per cent and topline (in rupee terms) at 16-17 per cent, yearly. Unlike for other IT firms, analysts see margin expansion for Infosys during the quarter under review due to absence of wage hikes and healthy improvement in revenues. Furthermore, large deal TCV is likely to be robust. CLICK HERE FOR FULL REPORT