23 June 2015
Update | Sector: Technology
MindTree Consulting
BSE Sensex
27,804
S&P CNX
8,382
CMP: INR1,351
TP: INR1,300 (-4%)
Neutral
Digital-ready
Capabilities, references in fast-growing Digital drive growth confidence
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val(INRm)/Vol‘000
Free float (%)
MTCL IN
83.7
1,589/834
-6/10/41
113.1
1.8
255/214
86.3
Financial Snapshot (INR Billion)
Y/E Mar
2015 2016E 2017E
Net Sales
35.6 41.8 49.7
EBITDA
Adj PAT
EPS (INR)
Growth (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
7.1
5.4
63.9
18.6
29.4
32.8
21.2
5.6
8.4
6.1
72.7
13.8
27.5
31.8
18.6
4.7
10.7
7.7
91.7
26.1
28.7
33.9
14.7
3.9
Shareholding Pattern (%)
As on
Mar-15 Dec-14 Mar-14
Promoter
DII
FII
Others
13.7
7.9
37.7
40.7
13.7
7.9
39.9
38.4
16.6
10.1
36.0
37.3
MTCL cited that the opportunity size in Digital-led IT services is expected to grow
to USD220b by 2020. The company has built significant capabilities and
references in Digital, and remains confident of continuing industry-leading
growth on the back of Digital push.
MTCL’s growth endeavor is focused on pillars of consultative selling, enabling
clients’ Digital transformation, focused acquisitions, and global expansion.
While pricing in Digital in the experimental stage is not at a premium, deal sizes
get significantly bigger as the programs move beyond the proof-of-concept stage.
MTCL expects traditional services (67% of the business) to continue driving
majority revenues despite faster growth in Digital. Its endeavor in traditional is to
differentiate every offering, aptly illustrated by its mWatch platform for IMS.
At 18.6x FY16E and 14.7x FY17E EPS, the stock trades well above the average
across its listed history (seven years). We believe that premium is justified, given
the execution over the last few years, but see limited upside to CMP at current
levels.
239.5 288.1 350.9
“Locally local”, mining-focused, Digital approach
MTCL’s 16.4% USD revenue growth in FY15 was well ahead of the industry and
contributed by the company’s healthy execution of client mining, along with the
capabilities in Digital. Strategic mining approach led to 22% growth in key
accounts, above the overall company growth.
MTCL remains confident of growing above the industry with its mining-focused,
“locally local” and Digital-based approach. The approach to client relationships
is changing too—from delivery excellence-led to business expertise-led.
Exhibit 1: Healthy execution has helped drive growth leadership
Notes:
FII incl. depository receipts
Stock Performance (1-year)
Source: Company, MOSL
Ashish Chopra
(Ashish.Chopra@MotilalOswal.com); +91 22 3982 5424
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.