Centrum Broking
Mindtree (Buy)
CMP: ₹562.45
Target: ₹680
Mindtree results were way below our estimates on topline, EBITDA and PAT. Offshore realisations dropped 4.5 per cent q-o-q, and this is the second consecutive quarter of steep drop in realisations. Led by Q1 revenue miss and softer guidance for Q2, we trim our dollar revenue growth to 15.2 per cent for FY17E (vs 18.6 per cent modelled earlier). Our FY17 growth implies an organic growth of 11 per cent and rest owing to full impact of acquisitions. We reset our operating profit margins lower led by Q1 margin miss. View: We have recently upgraded Mindtree to ‘buy’ as we believed that time correction and multiple de-rating have reached a fag end. However, Q1 results were a steep disappointment and way below street estimates, which lead us to trim our EPS estimates sharply. We note that Ind-AS adaption has led to increase in depreciation and amortisation, which is also a factor in the steep earnings cut. The stock would see a sharp correction owing to this result, and we recommend a gradual accumulation.
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