Mindtree Tumbles over 10% as Brokerages Cut Target Price after Q1 Results

Mindtree Ltd shares tumbled over 10% in intraday trade on Thursday, i.e. 18 July, after the company reported more than 50% sequential decline in net profit as well as operating income for the June quarter.

At 10:35 am, Mindtree shares were trading at Rs 704.05, down 6.2%, at BSE after hitting an intra-day low of Rs 670.95.

Mindtree’s net profit during the June quarter was down 53.3% sequentially to Rs 92.7 crore. The company’s revenue in rupee terms fell 0.3% quarter-on-quarter to Rs 1,834.2 crore, but dollar revenue rose 0.8% to $264.2 million. In constant currency terms, Mindtree grew 1.1% sequentially in the June quarter.

At the operating level, earnings before interest and tax (Ebit) fell sharply by 50.7% sequentially to Rs 117.2 crore, while margins contracted 650 basis points to 6.4% compared with the previous quarter.

Kotak Institutional Equities maintained a ‘reduce’ call on the stock, while cutting the target price to Rs 725 citing weak quarterly results and sharp margin contraction. It said the company’s revenue growth can recover, provided attrition is contained.

The brokerage house also cut the earnings per share estimates by 15-21% amid revised currency assumption and pricing pressure.

Motilal Oswal Securities maintained a ‘neutral’ view on the stock with a target price of Rs 750. “Our revised target price of Rs 750 discounts forward earnings by 15 times, against 16 times earlier, amid concerns over profitability and leadership transition,” said the brokerage house.

BNP Paribas also maintained ‘reduce’ rating on the stock, cutting the target price to Rs 670 from Rs 810 earlier.

Separately, Larsen and Toubro Ltd patriarch A.M. Naik was appointed the non-executive chairman of Mindtree effective 18 July.

L&T CEO SN Subrahmanyan was also appointed as the non-executive director along with Jayant Damodar Patil, whole-time director in L&T and senior executive vice president for L&T’s defence business, and Ramamurthi Shankar Raman, whole-time director and chief financial officer in L&T.

The new leadership is yet to be announced. According to reports, the three names in the running are Rajeev Mehta, former Cognizant president; Debashis Chatterjee, a former senior executive of Cognizant Technology Solutions; and Anjan Lahiri, former Mindtree CEO.