Mindtree Shares Up on Strong Earnings and Highest Ever Order Book

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  • Jul 14, 2021 - Mindtree Shares Up on Strong Earnings and Highest Ever Order Book

Mindtree Shares Up on Strong Earnings and Highest Ever Order Book

Jul 14, 2021

IT services company Mindtree yesterday announced healthy numbers for the quarter ended June 2021.

The key highlights of the quarter was its robust deal intake of US$504 m and a strong pipeline.

Owing to good results, shares of the company zoomed over 8% today to Rs 2,728, a new all-time high.

Key financials

Mindtree reported a 61% year on year (YoY) rise in its June quarter net profit to Rs 3.4 bn. This compared with Rs 2.1 bn in the same quarter last year. On a sequential basis, net profit was up 8%.

Its revenue from operations stood at Rs 22.9 bn, up 20%. The figures stood at Rs 19.1 bn in the year ago quarter.

In dollar terms, revenues came at US$310.5 m thereby witnessing a growth of 7.7% sequentially and 22.6% YoY.

Revenue by Industry

Mindtree's operating performance likely suffered due to the ongoing war for talent in the Indian IT sector.

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Its earnings before interest, tax, depreciation, and amortisation (EBITDA) stood flat, while margins shrank 160 basis points to 20.3%.

Mindtree's cash flow generation was weak for the June quarter.

Here's a table comparing Mindtree's result on key parameters.

Financial Snapshot

(Rs m) Q1FY22 Q1FY21 Q4FY21 YoY (%) QoQ (%)
Revenue 22,917 19,088 21,093 20.1% 8.6%
Total Expenses 18,983 16,596 17,294 14.4% 9.8%
EBITDA 4,645 3,478 4,626 33.6% 0.4%
Profit after tax 3,434 2,130 3,176 61.2% 8.1%
Free Cash Flow 973 5,986 3,168 -83.7% -69.3%
Cash and Investments 29,025 18,665 28,057 55.5% 3.5%
Data Source: Company Filings

Highest ever order book

Mindtree recorded the highest ever order book of half a billion dollars.

The company said it has 260 active clients as of 30 June 2021. The company added one client in the US$20 m plus category and five clients in the US$10 m plus category during the quarter.

Commenting on the results, Mindtree CEO and MD Debashis Chatterjee said,

  • We are pleased to report a strong start to FY22 with broad-based first-quarter growth across all service lines and industry segments.

    Our highest-ever orderbook of US$504 m affirms that the focused execution of our strategy and our client-centricity in re-imagining business models for the digital era are helping us drive profitable and sustainable growth.

The company's management indicated that deal intake remains well-balanced across annuity and transformational deals, and the pipeline remains healthy despite strong closures.

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The company's management also indicated that they are confident of delivering industry-leading double-digit revenue growth in financial year 2022.

However, high client concentration has been a key concern for the company.

The management said it was focusing on reducing revenue concentration of its top clients gradually.

Mindtree on a hiring spree

The Larsen & Toubro (L&T) owned company made net additions of over 3,400 people for the quarter ending June 2021, its highest ever in a quarter.

As demand remains robust, the company is also ramping up hiring and will also roll out hikes, said its CEO.

Mindtree saw its attrition level increase to 13.7% in the June quarter from 12.1% in March 2021. Total employee count stood at 27,256.

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Equitymaster's view on investing in the IT sector right now

We reached out to Richa Agarwal, senior research analyst and editor of the smallcap stock recommendation service, Hidden Treasure, for her view on the IT sector.

Here's what she has to say about investing in companies in the IT sector right now.

  • Post pandemic, amid liquidity in the global markets and broad-based growth momentum, the IT sector and the stocks listed in it have had a dream run.

    While picking stocks in the industry, one should be mindful of relative growth and valuation of companies in the sector.

IT sector is one of those few sectors, which remained unaffected by the Covid sell-off. In fact, IT stocks emerged bull's favourite during the Covid-19 pressure.

Despite the Covid-19 fear, IT and tech stocks emerged as the top gainers in the Covid period. Especially largecap IT stocks including Mindtree.

Recently, global technology research and advisory firm Information Services Group (ISG) provided its outlook for the IT industry.

Among the key highlights were its commentary on strong deal momentum and improving growth outlook for the sector led by cloud migration.

Market's reaction to Mindtree's results

Mindtree share price rallied over 9% to hit a fresh 52-week high of Rs 2,728 on the BSE today, after it reported better than estimated earnings.

Presently, it is trading up by 7%.

Majority of the IT stocks are trading on a positive note today with Mindtree, Mphasis and Tech Mahindra leading gains.

Over the past year, shares of Mindtree have rallied over 145% as compared to 46% gains in BSE Sensex.

The company's promoters hold 61% stake in the company, while FIIs hold 13.9% stake.

DIIs stake in the company stood at 10.9% and public and others at 14.2%.

At the current price of Rs 2,690, Mindtree commands a marketcap of Rs 443.5 bn.

About Mindtree

Mindtree is an international IT consulting and implementation company that delivers business solutions through global software development.

It was founded in the year 1999 and now has more than 27,000 employees around the globe. It is headquartered in New York and Bangalore.

Mindtree provides services in ecommerce, mobile applications, cloud computing, digital transformation, data analytics, EAI and ERP, and testing.

To know more about the company, check out Mindtree company fact sheet and Mindtree quarterly results.

For a sector overview, read our IT sector report.

You can also compare Mindtree with its peers on our website.

Mindtree vs TCS

Mindtree vs Infosys

Mindtree vs HCL Tech

Mindtree vs Mphasis

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

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