Mindtree reported organic c/c revenue growth of 3.6% and reported growth of 6.1%, a material outperformance after the guiding down in Mar 2016. Growth was led by the travel and hospitality vertical and top client. EBITDA margins continue to disappoint and have declined 60 bps q-o-q despite rupee depreciation.We expect Mindtree to report robust growth in FY17 but are more cautious on profitability. Valuations at 15.5X FY2018E EPS are full. We roll forward; maintain ‘reduce’ and TP of `713, valuing Mindtree at 15X FY18E P/E (16X Sep 2017E earlier).
Mindtree reported robust organic c/c revenue growth of 3%. Reported revenue growth of 6.1% to $195.6 million included $6 million from Magnet 360 acquisition. Revenue growth was powered by top account that grew 14% q-o-q and 26% y-o-y. Revenues from top 10 clients declined 7% q-o-q. Travel and transportation vertical grew 9% q-o-q. Verticals that formed the rationale of profit warning in March, viz. financial services and retail & CPG declined 2% and 5% respectively. EBITDA margin decline of 60 bps was surprising against the backdrop of strong revenue growth, rupee depreciation and increasing in utilization rate. We attribute the decline to pricing pressure (offshore rate down 4% q-o-q and 7.6% y-o-y). Net income of `1.56 billion was in line with our estimate.
