Mindtree rallies 6%, hits new high in a weak market; zooms 101% in 6 months

In Q1FY22, the company saw healthy order book led by closure of certain deals (especially BFSI), increase in multi-year deals , renewals, higher demand from retail & CPG clients

Shares of Mindtree hit a new record high of Rs 3,393, in an otherwise a weak market, after they rallied 6 per cent on the BSE in the intra-day trade on Friday. In comparison, the S&P BSE Sensex was down 0.41 per cent at 55,403 points at 09:36 am.

In the past six months, the market price of Mindtree has appreciated 101 per cent as compared to a 9 per cent rise in the benchmark index. Over three months, it has soared 62 per cent as against a 12 per cent rally in the Sensex.

For the quarter ended June 2021 (Q1FY22), the information technology (IT) consulting and services company reported a healthy set of numbers. Net profit increased by 61.2 per cent year-on-year (YoY) at Rs 343.4 crore (up 8.2 per cent sequentially) while 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 $504 million. The company added 3,442 employees in the quarter. Offshore effort mix increased 60 bps QoQ to 83.5 per cent.

According to analysts, the company has healthy order book led by closure of certain deals (especially BFSI), increase in multi-year deals (increase in deal tenures), renewals, higher demand from retail & CPG clients and traction in cloud & customer experience, which bode well for the IT firm.

"Mindtree is seeing healthy traction in travel clients (led by leisure travel). An increase in business travel will further boost growth. Further, considering the company’s ability to cross sell, up sell, inorganic expansion, organic expansion via P&L, expansion in Europe and higher growth in BFSI & Retail prompts the company to believe it will be able to clock industry leading double digit growth in FY22E (which we estimate at 21 per cent YoY)," ICICI Securities had said in a result update.

This, coupled with healthy win ratio, shift of spend from run to new, transformational projects and the company’s digital prowess is expected to lead to sustainable revenue growth in coming years, the brokerage firm said. The stock, however, is trading above its target price of Rs 3,065 per share.