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Dear Reader,
We are glad to inform you that Value Pick - March'14 stock -
Mindtree has achieved its target price of Rs. 940 (bonus issue adjusted target
price, actual target price was 1880). Mindtree has given returns of 47.2% since
our recommendation on 23rd Mar'14.
Mindtree recently announced that it has been selected by ING
Vysya, as a strategic digital partner for its next generation mobility program.
As part of this program, MindTree will help the ING Vysya deliver multi-channel
and multi -platform banking experience to its customers while creating a
digital roadmap designed to help the bank penetrate untapped markets with a
simple yet differentiated service.
Company has announced its 1st quarter results on 17th
July'14, net profit of Mindtree declined 4.36% to Rs 129.40 crore in the
quarter ended June 2014 as against Rs 135.30 crore during the previous quarter
ended June 2013. Marginal decline in profits was due to large forex gain which
company had in Q1 of FY 2013-14 as a result of market swing during that
quarter. Moreover, sales rose 30.23% to Rs 843.50 crore in the quarter ended
June 2014 as against Rs 647.70 crore during the previous quarter ended June
2013.
Company Background:
MindTree Consulting is a mid-size Indian IT and R&D services
company. The company has two business units: IT Services and Product
Engineering Services (PES). MindTree's IT services business comprises of IT
strategic consulting, application development, data warehousing and business
intelligence, application maintenance, package implementation and application
product engineering. The PES unit is organized into three sub-divisions -
R&D services, Software Product Engineering and Next in Wireless (cellular
infrastructure development). The company's revenue and net profit grew at annual
average rates of around 28% and 66% respectively during FY07 to FY12.
Company delivers technology services and accelerates growth for
Global 1000 companies by solving complex business challenges with breakthrough
technical innovations. Mindtree specializes in e-commerce, mobility, cloud
enablement, digital transformation, business intelligence, data analytics,
testing, infrastructure, EAI and ERP solutions. Company is among the fastest
growing technology firms globally with more than 200 clients and offices in 14
countries
Recent Development: (as on 23rd Mar'14)
1. Open market purchase of shares by
CEO & MD of the Company
As per the disclosures under Reg. 19(4) of SEBI regulations
1992, Mr. Krishnakumar Natrajan has purchased 3,340 shares of Mindtree at
average price of 1381.5 on 19th & 20th March. Total holding of Mr.
Natarajan after purchase is increased to 19,98,043 i.e. 4.8%.
Mindtree has corrected almost 20% from its 52 week high of 1727,
correction in stock price has been seen considering company Q3 results below
expectations (company’s third quarter net profit declined 10 percent
year-on-year on foreign exchange losses) and recent appreciation in Rupee.
We believe Mindtree valuations at CMP of 1391 are reasonable and is a
good investment opportunity for medium / long term investors.
2. Mindtree signs pact with SITA for
finance system platform
Mindtree has inked a deal with SITA for providing application
support and evolutionary maintenance services for the strategic finance system
(SFS) platform. SITA specialises in providing IT and telecommunication services
to the air transport industry. The SFS, based on Oracle's eBusiness suite,
consolidates all internal and external finance processing across the globe for
200 countries, encompassing 310 entities, Mindtree said in a statement.
Mindtree will provide level 2 and 3 application support for SFS for 3 years,
including database administration and monitoring, consulting services and
maintenance to improve operational efficiency, application enhancements,
customisation and new report generation.
3. Better demand outlook compared to
last year
Mindtree
expects the financial year ahead to be a much stronger one, citing robust
demand outlook. The company also expects the current quarter to be a better one
compared to the December quarter. At a press conference, the company said it
had won “several” multi-million dollar deals in the December quarter. It added
1 customer is the USD 5 million deal bracket, and also won a deal for payment
services from a large financial institution.
Saral Gyan Recommendation:
Considering reasonable valuations, good future prospects and
management business plans to drive growth, Saral Gyan team recommends buy on
Mindtree Ltd for target price of Rs. 1880 (price appreciation of 35% from
current market price) over a period of 12-24 months.
Buying Strategy:
- 60% at Current Market Price - 1391
- 40% at price range of Rs. 1150 - 1250 (in case of any fall in stock price during market correction)
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