Buy This Multibagger Large-Cap IT Stock For 38% Potential Gains: HDFC Securities

Mindtree Stock Outlook

Mindtree Stock Outlook

The current market price (CMP) of Mindtree is Rs 2,786.50 per share after closing on Thursday. It was opened at Rs 2,960 per share, while the previous close was Rs 2,900.60 per share. The CMP of the stock is Rs 328.95 above the 52-week low of 2,457.55 per share level, recorded on July 13, 2021. The 52-week high is Rs 5,060 per share, recorded on November 18, 2021.

According to Sharekhan’s estimated target price of Rs 3,830 per share and the CMP of Rs 2,786.50 per share, the stock sees a potential upside of 38% in 12 months

The stock has slid 3.21% in the past 1 week and 4.64% in the past 1 month, respectively. It has given 3.09% of positive returns in 1 year. On 3 and 5 years of investment, it has given multibagger returns of 270.47% and 441.12%, respectively.

Q1FY23 highlights

Q1FY23 highlights

  • Mindtree reported a sixth consecutive quarter of revenue growth of > 5% QoQ CC at USD 399mn (in line with our estimate of USD 400mn), +4% QoQ in USD terms (+5.5% QoQ CC), led by healthy growth in a top account (+8.6% QoQ).
  • EBITDAM improved by 10bps QoQ to 21.1%, supported by operational efficiency (+50bps) and FX tailwind (+70bps); partially offset by visa cost (-50bps) and one-time M&A cost (-60bps).
  • Among the verticals, growth was led by travel (+11.3% QoQ; airline & hospitality exceeding pre-COVID level), BFSI (+6.6% QoQ); and communications, media & tech (+5.9% QoQ). However, retail, CPG and manufacturing declined -8.8% QoQ, impacted by ramp-down in a retail client.
  • Deal TCV in Q1FY23 was at a record high of USD 570mn, 13.1% YoY.
  • Mindtree had a net headcount addition of 3,284 in Q1 (1,500 fresher intakes) and it intends to continue >1,500 quarterly fresher additions in FY23E.

Key positives

Key positives

  • Consistency in delivering industry-leading growth > 5% QoQ CC, (2) strong credentials in hi-tech and travel vertical (airlines and hospitality exceeding pre-COVID levels)
  • Healthy TCV bookings with TCV growth of 13% YoY
  • Focus on building full stack services and client rationalisation (focus on 100 accounts that contribute 90% of the total revenue)
  • Stable sub-contracting expenses (9.6% of the revenue in Q1 vs 10.2% in FY22).

HDFC Securities Suggests Buy For Target Price of Rs 3,830 per share

HDFC Securities Suggests Buy For Target Price of Rs 3,830 per share

The brokerage said, “We have factored in USD revenue growth of +19.9/+16.4% and EBITDAM at 20.2/19.8% for FY23/24E. We expect an EPS CAGR of 17% over FY22-24E.”

Added, ” We expect MTCL to deliver a high-teens growth CAGR in FY22-24E, supported by expansion into Continental Europe and core portfolio focus (cross-sell), with predictable margins (management maintained 20%+ EBITDAM outlook). Maintain BUY with a TP of INR 3,830, valuing Mindtree at 28x FY24E EPS”

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