Mindtree share price falls 2% despite Q1 results beating Street estimates; should you buy, hold or sell?

Mindtree share price fell 2.5 per cent on Thursday to hit an intraday low of Rs 2,780 on BSE. The fall comes a day after the company reported a 37.3 per cent on-year growth in its consolidated net profit at Rs 471.6 crore for Q1FY2023.

Mindtree share price falls 2% despite Q1 results beating Street estimates; should you buy, hold or sell?
So far this year, Mindtree shares have plunged 41%. However, analysts see up to 69% potential rally going forward on the back of strong growth

Mindtree share price fell 2.5 per cent on Thursday to hit an intraday low of Rs 2,780 on BSE. The fall comes a day after the Bengaluru-based IT services company reported a 37.3 per cent on-year growth in its consolidated net profit at Rs 471.6 crore for the quarter ending 30 June, 2022. Mindtree’s revenue increased 7.7 per cent to Rs 3,121.1 crore compared with the previous three months. This is a sixth straight quarter of more than 5 per cent revenue growth for the company in constant currency terms. So far this year, Mindtree shares have plunged 41%. However, analysts see up to 69% potential rally going forward on the back of strong growth.

Should you buy, hold or sell Mindtree shares?

Edelweiss: Buy
Target price: Rs 4,917; Upside: 69%

According to analysts at Edelweiss Securities, Mindtree posted strong Q1FY23 numbers – revenue grew 4.0% QoQ to USD 399.3 mn, beating Street’s estimates of USD389.8mn, while in-line with their estimates of USD400mn. Margins improved 30bp to 19.2%, also beating estimates of 18.6%/18.3%. PAT margin came in at 15.1% compared to the estimate of 15.3%/15.1%. “Mindtree and LTI’s merger is progressing well. We believe a successful integration can create strong cross-selling opportunities. Overall growth and TCV were strong,” they said. The brokerage maintains a ‘Buy’ call on the IT services stock with an unchanged target price of Rs 4,917 (40x Q3FY24E).

JM Financial: Hold
Target price: Rs 3,290; Upside: 13%

Analysts at JM Financial stated that amidst increasing investor concerns on macro deterioration and mixed results from Tier I tech companies that have reported 1QFY23 till date, Mindtree’s performance stands out in contrast as it delivered a 5.5% QoQ c/c growth marking the 6th successive quarter of 5%+ growth. “We raise FY23E EPS driven by 1Q beat though moderate FY24-25 revenue growth slightly given macro volatility driving 2-3% cuts for FY24/25,” they said. The brokerage maintains ‘hold’ rating on the stock with a target price of Rs 3,290, implying 13% upside from previous closing price of Rs 2,900 per share.

ICICI Securities: Hold
Target price: Rs 2,969; Upside: 2%

Analysts at ICICI Securities said that Mindtree’s Q1FY23 print was strong on all fronts including six consecutive quarters of >5% QoQ CC growth; impressive beat on margins; record-high deal TCV; continued pace of hiring. “We are impressed with MTCL’s consistency and disciplined execution on profitability. We continue to value the stock at 23x FY24E EPS of Rs 126 to arrive at a target price of Rs 2,969,” they said. The brokerage maintains a ‘hold’ rating on the stock. Rupee weakness is an upside risk to EPS while continued macro-weakness poses downside risk on valuations/revenue momentum.

Motilal Oswal: Neutral
Target price: Rs 3,020; Upside: 4%

According to the brokerage report, Mindtree management’s increased focus on annuity revenue and strategic accounts is reflected in its revenue and client mix. A strong outlook on strategic accounts, decent deal signings, and the ability to sustain improved margin are key positives for the stock. “The stock is currently trading at 20x FY24E EPS. As the key positives are already captured, we see limited upside hereafter,” it said. Brokerage’s target price of Rs 3,020 per share implies 21x FY24E EPS. It maintains a ‘Neutral’ rating on the stock.

(The stock recommendations in this story are by the respective research analyst. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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