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Mindtree: Performance Along Expected Lines - Views on News from Equitymaster
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Mindtree: Performance Along Expected Lines
Apr 21, 2016

Mindtree has announced results for the fourth quarter and full year FY16. The company has reported a 9% QoQ growth in sales and a 3.4% QoQ growth in net profits in 4QFY16. Here is our analysis of the results.

Performance summary
  • Consolidated net sales grew by 9% QoQ during 4QFY16. The topline was up 6.1% QoQ in US dollar terms and 7.1% QoQ in constant currency terms. The full year FY16 consolidated sales were up 31.7% YoY, helped by the 4 acquisitions the company made during the year.
  • The operating profit increased by 5.2% QoQ and operating margins fell to 17.1% compared to 17.7% seen in 3QFY16. This was because of a 13.1% QoQ increase in employee costs in the quarter, which in turn was due to performance bonuses given to employees of the newly acquired entities.
  • The company's other income fell 36.1% QoQ due to a fall forex gains sequentially.
  • Largely due to the strong topline performance, the net profit increased by 3.4% QoQ. The full year net profit was up 12.5% YoY.
  • The company has announced a final dividend of Rs 3 per share.

    Consolidated Financial performance
    (Rs m) 3QFY16 4QFY16 Change FY15 FY16 Change
    Sales 12,145 13,242 9.0% 35,619 46,896 31.7%
    Expenditure 9,998 10,983 9.9% 28,527 38,592 35.3%
    Operating profit (EBITDA) 2,147 2,259 5.2% 7,092 8,304 17.1%
    Operating profit margin (%) 17.7% 17.1% 19.9% 17.7%
    Other income (Including forex gain/loss) 147 94 -36.1% 835 805 -3.6%
    Depreciation 345 348 0.9% 1,018 1,332 30.8%
    Finance costs 0 1 1 3
    Profit before tax 1,949 2,004 2.8% 6,908 7,774 12.5%
    Tax 440 444 0.9% 1,545 1,741 12.7%
    Profit after tax/(loss) 1,509 1,560 3.4% 5,363 6,033 12.5%
    Net profit margin (%) 12.4% 11.8% 15.1% 12.9%
    No. of shares (m) 167.8
    Diluted earnings per share (Rs)* 36.0
    P/E ratio (x)* 19.9

    *On a trailing 12-month basis

  • What has driven performance in 4QFY16?

    • In terms of the operating metrics, the performance was mixed. The hi-tech and media vertical along with the recent acquisitions (included in 'others") delivered the best performance in 4QFY16.

      Segmental performance
      Revenue Break-up (Rs m) 3QFY16 4QFY16 Change
      On basis of industry vertical
      Manufacturing, CPG & Retail 2,465 2,410 -2.2%
      BFSI 3,048 3,072 0.8%
      Travel & Hospitality 1,895 2,132 12.5%
      Hi-Tech & Media Services 3,668 4,158 13.4%
      Other 1,069 1,470 37.5%
      On basis of geography
      US 7,712 8,726 13.2%
      Europe 3,206 3,244 1.2%
      India 328 371 13.1%
      Rest of the world 899 900 0.2%
      On the basis of service offerings
      Development 2,878 3,046 5.8%
      Engineering 1,008 1,298 28.7%
      Maintenance 2,405 2,384 -0.9%
      Consulting 316 530 67.7%
      Package Implementation 1,567 1,801 14.9%
      IP Led Revenue 219 199 -9.1%
      Independent Testing 1,555 1,668 7.3%
      Infrastructure Management & Tech Support 2,198 2,317 5.4%
    • At the operating level, the margin fell to 17.1% in the quarter due to integration of acquisitions. As we have stated before, we don't see margin improvement going forward.
    • At the net level, the strong topline performance was sufficient to ensure an increase of 3.4% QoQ in the bottomline.
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