Buy This IT Stock With Rs. 3,830 Target Price, Stock Gained 602% In 5 Yrs: HDFC Securities

HDFC Securities, a top brokerage firm recommends investors to buy the stock of Mindtree, with an Rs. 3,830 target price for high returns. This multibagger IT stock has surged by around 602% in the last 5 years.

Stock To Buy: Target Price

The Current Market Price (CMP) of Mindtree is Rs. 3,392. HDFC Securities has estimated a Target Price for the stock at Rs. 3,830. It is a large-cap stock with a market capitalization of around Rs. 53,873 crore. This stock has the potential to give 12.91% return, in the upcoming 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 3,392
Target Price	Rs. 3,830
Potential 1 year return	12.91%
52 week high share price	Rs. 5,060
52 week low share price	Rs. 2,649.20

Financials

 

The company's revenue in FY22 was recorded at Rs. 1,411 b, which is expected to be at Rs. 1,691 b in FY23. Their EBIT in FY22 stood at Rs. 19.54 b, which is expected to be at Rs. 23.95 b in FY23. The company's adj. PAT in FY22 was recorded at Rs. 16.53 b, which is expected to be at Rs. 19.46 b in FY23.

Stock Advantages: HDFC Securities

According to HDFC Securities, "Mindtree's strong credentials in hi-tech and travel & hospitality verticals and scale#up in partner ecosystem will fuel growth. We expect Mindtree to deliver growth in high-teens CAGR in FY22-24E, supported by expansion into Continental Europe and core portfolio focus (cross-sell), with predictable margins (management maintained 20%+ EBITDAM outlook). We have factored in USD revenue growth of +19.9/+16.4% and EBITDAM at 20.2/19.8% for FY23/24E. We expect an EPS CAGR of 17% over FY22-24E. Our target price of Rs. 3,830 is based on 28x FY24E EPS."

Robust demand environment

The demand environment continues to be robust, supported by strong TCV win of USD 570mn in Q1FY23 as well as Q2FY23 order book is healthy. Cloud & infra service remains to the top spend area for most of the enterprises and there is no slowdown in these services. Retail & Consumer vertical is seeing some signs of weakness due to inflation, Russian market vanishing and supply chain dependence on China. In the RCM vertical, one of the European footwear clients had a high dependence on China and Russia businesses which had an impact; Mindtree expects marginal decline for the next 2-3 quarters. In hi-tech vertical, customers accelerating digital transformation services.

Offshore business

There are challenges in EU but the company remains cautiously optimistic on this region. Utilisation to be in the range of 80-82% and offshore effort mix of 85% in FY23 (80% in FY24). Mindtree added 5-6k freshers in last 3-4 quarters, which is 10-12% of the total headcount and targets it to be 20-25%, going ahead. Q2FY23 will be in line with the company's expectation of industry leading growth. This quarter will be an exceptional quarter for the company as the order book is good since one of the large customers which had annual renewal is now looking to give 2-3 years' contract. The company maintains its guidance of 20%+ EBITDA margin for FY23E.

Company Portfolio: Mindtree

Mindtree delivers digital transformation and technology services from ideation to execution, enabling Global 2000 clients to outperform the competition. Mindtree takes an agile, collaborative approach to creating customized solutions across the digital value chain. With large global presence, their expertise in infrastructure and applications management turns IT into a strategic asset.

Disclaimer

The above stock was picked from the brokerage report of HDFC Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.