Mindtree slips nearly 5% ahead of Q2 nos; here's what brokerages expect

The growth outlook of the top client and margin outlook are the key monitorables.

Shares of mid-tier IT company Mindtree slipped as much as 4.73 per cent to Rs 1479.9 in the morning trade on the BSE on Thursday ahead of its September quarter results (Q2FY21) announcement due later in the day.

At 10:25 AM, the stock was trading nearly 4.5 per cent lower at Rs 1484.70 on the BSE. In comparison, the benchmark S&P BSE Sensex was trading 151 points, or 0.37 per cent lower at 40,644 levels. 

For the September quarter, analysts at Centrum Broking expect Mindtree's US dollar revenues to grow by 3.5 per cent quarter-on-quarter (QoQ) led by traction in Top account as well as the ramp-up of select large deals. It expects earnings before interest, and tax (EBIT) margin to improve by 215 basis points to 15.9 per cent bps QoQ owing to lower forex losses in other expenses. It must be noted that "Mindtree is reporting forex losses in other expenses unlike peers which are showing in other income," the brokerage said in its earnings preview note. 

In rupee terms, net sales is expected to come in at 1,944.5 crore, up 1.9 per cent QoQ and 1.6 per cent YoY. Net profit or profit after tax (PAT) is seen at Rs 231.7 crore, up 8.8 per cent QoQ and 71.6 per cent YoY.

According to Prabhudas Lilladher, Mindtree is expected to post 3.2 per cent QoQ growth in constant currency, which will be led by the Realogy deal, a strong recovery in BFSI and CPG verticals. In US dollar terms, revenue is expected to increase 4 per cent QoQ but decline 2.8 per cent YoY at $263 million. In rupee terms, revenue is seen at Rs 2,031.6 crore, up 6.4 per cent QoQ and 6.1 per cent YoY. EBITDA is estimated to grow 20.6 per cent QoQ and 56.5 per cent YoY at Rs 388.4 crore. 

EBIT margin is expected to improve by 214 bps QoQ to 15.9 per cent on account of strong cost control measures and revenue flow from the Realogy deal. Adjusted net profit is seen at Rs 250.7 crore, up 13.3 per cent QoQ and 85.7 per cent YoY. 

Growth outlook of the top client, margin outlook, the management strategy for the next two years, outlook on T10 accounts, and pricing & renewal commercials/DSO situation with large accounts will be the key things to watch out for.