Mindtree surges 12%, hits new high on strong September quarter earnings

The brokerage firm ICICI Securities is of the opinion that all positives seem to be largely priced in at the CMP for Mindtree and hence the stock may see limited upside from here on

Shares of Mindtree surged 12 per cent to Rs 4,883.4, also its record high on the BSE in Thursday's intra-day trade after reporting strong earnings for the July-September quarter (Q2FY22), with 12.8 per cent sequential growth in dollar revenue. Earnings before interest, tax, depreciation and amortisation (EBITDA) margin also improved 20 basis points (bps) quarter-on-quarter (QoQ) to 20.5 per cent.

In rupee terms, the consolidated revenue was up 12.9 per cent QoQ at Rs 2,586 crore, while net profit rose 16.2 per cent QoQ to Rs 399 crore.

The stock of the information technology (IT) consulting & software company surpassed its previous high of Rs 4,732 touched on September 24, 2021. At 09:20 am, it was trading 9 per cent higher at Rs 4,750.80, as compared to a 0.63 per cent rise in the S&P BSE Sensex.

The board has approved an interim dividend of 100 per cent or Rs 10 per equity share of the face value of Rs 10 each. October 22, 2021, has been fixed as the record date for payment of the interim dividend.

In Q2FY22, revenue growth was driven by technology, media and services (up 5.6 per cent QoQ), BFSI (up 8.4 per cent QoQ), retail, CPG and manufacturing (up 29.6 per cent QoQ) and travel & hospitality (up 14.4 per cent QoQ). On EBITDA margins, there was an impact of -140bps due to wage hike and -30bps on currency, which was mitigated by +190 bps impact from strong growth, ICICI Securities said in a note.

However, Mindtree is currently trading at expensive valuations of 45x FY23E EPS and we are of the opinion that all positives seem to be largely priced in at the CMP, the brokerage said, adding that it sees limited upside from here on in the stock price.