MindTree Results In Line With Expectations

MindTree announced their quarterly results earlier today and the markets have taken them positively with the stock prices moving up by more than 3 per cent today. The firm expects to be in line with NASSCOM’s growth guidance for FY13 of 11-14 per cent. The dollar revenue of MindTree for Q1FY13 rose by 0.48 per cent sequentially from USD 105 million to USD 105.5 million, which is not impressive in terms of dollar growth. However, the EBITDA and the net profit of the firm improved significantly, reaching USD 22 million and USD 16.7 million respectively. This signifies a growth of 11.68 per cent and 21.01 per cent in EBITDA and Net Profit respectively, thereby improving the overall margins.

In rupee terms though, like most IT companies MindTree got benefited due to the depreciating rupee and witnessed a revenue growth of 7.10 per cent with revenue increasing from Rs 525.7 crore in Q4FY12 to Rs 563 crore in Q1FY13. Likewise, the net profit of the firm increased by 28.61 per cent from Rs 69.2 crore to Rs 89 crore for the same period.

Geographically, the firm saw more revenue being generated from America and Europe, its key operational regions, while India and the rest saw de-growth, though these changes were marginal. The other segments too, in terms of service offering and industry, were pretty much stagnant by way of revenue contribution, indicating no drastic changes.

We feel that the results of MindTree have been in line with the industry standards which are sub-par at the moment. With industry body guidance reduced and with big players facing headwinds, we maintain our say of being relatively optimistic about the performance of mid-cap IT stocks. These companies have the prospective to grow at a faster pace due to the smaller base and due to the current global dynamics resulting in disintegration of large deals. YTD, MindTree has yielded a return of 71.41 per cent. Having looked at the appreciation of this stock so far, we think large exposures in the scrip can be dodgy.

Financials Of MindTree For Q1FY13 and Q4FY12

Revenue Segmentation