The MindTree stock sank in trade today after its Q2 revenue came below estimates and concerns over high valuation of the share persisted. The stock lost up to 17.66% or 172.95 points to hit an intra day low of 806 level on the BSE. At 1:47 pm, the stock was trading 15.22% or 148.95 points lower at 830 on the BSE.
The mid cap stock opened at a loss of 6.53% in trade today. The stock has been losing for the last two days and has lost 15.45% during the period. The stock has gained 67.15% during the last one year and risen 36.53% since the beginning of this year. The stock closed at 978.95 level on Wednesday.
MindTree's revenue rose 2.2% quarter on quarter (QoQ) to $246 million, below the estimate of 5% QoQ growth, Motilal Oswal said in a note.
In rupee terms, the firm's revenue rose 31.8 per cent to Rs 1,755.4 crore in the quarter under review from Rs 1,331.6 crore in the year-ago period.
"As revenue is the key driver for the firm's profitability, we have also lowered our FY19/20 EBITDA margin estimate by 72bp/83 bps, which in turn drives 8.7%/7.1% cut in earnings per share," the brokerage said. However, it maintained buy rating with long -term competitive advantages within Digital intact. It revised upward its target price to 1125 per share, a rise of 15%.
Bengaluru-based IT firm Mindtree reported a 65.4 per cent rise in consolidated net profit at Rs 206.3 crore for the September quarter and exuded confidence of registering strong revenue growth for the full fiscal despite "some challenges in the global business environment".
The company had registered a net profit of Rs 124.7 crore in the year-ago period. On sequential basis, the net profit was higher by 30.4 per cent, while revenue grew 7.1 per cent.
Kotak Institutional Equities cut its target price for the MindTree stock to Rs 1,080 from Rs 1,225. Muted constant-currency revenue growth is disappointing. Growth is strong from top-10 clients but weak from rest, the brokerage said. It cut margin estimate by 20-40 bps for FY2019-21 and earnings per share by 0-3%.
Morgan Stanley too cut its dollar revenue estimates by up to 1.5%. Valuation for $ revenue CAGR of 15% looks reasonable. The brokerage sees an EPS CAGR of 29% over FY18-20. It is overweight on stock with a target price of Rs 1265 per share.
Trading sentiment in the stock was hit as the company maintained a cautious business outlook amid volatile macroeconomic scenario across the world.
"We sense a cautious and a volatile macroeconomic scenario in the world and that will pose some challenges to the business environment. In addition, Q3 has a regular seasonality factors as well. Inspite of these headwinds, we are confident that we have a very strong pipeline," Mindtree CEO and Managing Director Rostow Ravanan said in a conference call on Wednesday.
Credit Suisse said while the stock has come off 15% in the past month, it remains one of the most expensive stocks in the sector. If growth slows down, valuations may not be sustained. The brokerage maintained neutral stance on the stock with a target price of Rs 1025.
However, Prabhudas Lilladher has given a 'buy' call on the stock post the announcement of Q2 earnings. The brokerage has given a target price of 1140 per share for one year. The recommendation was made at a price of 981.70.
13 of 29 brokerages rate the stock "buy" or 'outperform', seven "hold" and nine "underperform" or "sell", according to analysts' recommendations tracked by Reuters.
MindTree Limited is an international information technology consulting and implementation company that delivers business solutions through global software development. The company operates in five segments: Retail, CPG and manufacturing (RCM); banking, financial services and insurance (BFSI); technology, media and services (TMS); travel and hospitality (TH), and others.