MindTree slips 9% on profit booking after Q1 results

Shares of MindTree have slipped by 9% to Rs 971 on the BSE in intra-day trade on Thursday after the management said that expected revenue growth rate in September quarter (Q2FY19) to be less than that of June quarter (Q1) on reported basis; however, margins are expected to be better in constant currency (CC).

Mid-sized IT firm MindTree posted a 30% rise in consolidated net profit at Rs 1.58 billion for Q1FY19. It had profit of Rs 1.22 billion in the year-ago quarter.

The company’s revenue rose 27.1% to Rs 16.40 billion in the quarter under review from Rs 12.90 billion in the year-ago period. In dollar terms, revenue grew 6.8% QoQ to US $ 241.5 million (CC 8.2%).

EBITDA (earnings before interest, tax, depreciation and amortization) margin declined 200bps to 14.1% in Q1 from 16.1% in Q4.

“MindTree expects growth to improve in FY19 on the back of a strong start to the year, robust deal wins (around US $1 billion on TTM basis), and a healthy deal pipeline coupled with improving win rates, traction in the top account and growing deal sizes in Digital,” analyst at SBICAP Securities said in result review.

"We maintain HOLD on the stock with a target price of Rs 960 at 18x Jun’20e earnings, considering rich valuations, lop-sided revenue growth (top client contributing around 40% of incremental revenue) and weak cash conversion."

In past one year, shares of MindTree had outperformed the market by surging 109% as compared to 15% rise in the S&P BSE Sensex till Wednesday.

At 10:56 am; the stock was trading 8% lower at Rs 978 on the BSE, against 0.18% rise in the benchmark index. The trading volumes on the counter more than doubled with a combined 5.07 million shares changed hands on the BSE and NSE so far.