Buy This Multibagger IT Stock For A Target Price of Rs. 5,310

MindTree Ltd is a mid-cap IT firm with a market capitalization of Rs. 58,767.93 crore. This division of the Larsen & Toubro Group specialises in digital transformation and technology services globally. The company's stock rose from Rs 1599.75 on February 26, 2021 to Rs 3,793.75 on February 25, 2022, 3:30 p.m. IST on the NSE, resulting in a multibagger return of +2,194.00 (137.15 percent) in one year. In the last six months, the stock has gained +298.80 (8.55 percent), +208.55 (5.82 percent) in the last month, and +61.65 (1.65 percent) in the last five days. The stock is down 1,048.30 on a year-to-date (YTD) basis (-21.65 percent ). Axis Securities has issued a buy call on the stock with a target price of Rs. 5,310, emphasizing the company's long-term sustainable development through a client-focused strategy.

Investment rationale for Mindtree

Axis Securities has highlighted that "Mindtree has a focused strategy to capitalize on the demand scenario. The company intends to focus on five verticals; RCM (Retail, Product & Manufacturing), BFSI (Banking and Finacial services ), TTH (Travel, Tourism & Hospitality), CMT (Communication & Technology) and Healthcare which has strong demand. The management also has a strong focus on developing expertise in four service lines including Customer Success, Data Intelligence, Cloud, and Enterprises IT. The geographies Mindtree plans to focus on are North America, the UK, Ireland, Continental Europe, APAC, and the Middle East. The spending across these geographies remains healthy and Mindtree has positioned itself well to capitalize on the rising demand in these verticles and geographies."

The brokerage has claimed that "The Mindtree has identified six target areas to achieve growth in FY23: 1. Partnering with clients across Digital, Data, Cloud, and Enterprise to build full-stack accounts, 2. Re-imagine the ecosystem by strengthening Hyperscaler relations through dedicated business units, 3. Moving the focus from the IT operation to productisation of IT services and build consultancy-led approach, 4. Target to transform clients' shop floor on one side and user/client experience on the other side, 5. Helping clients to converge businesses across multiple sectors, and 6. Helping clients to develop the next generation delivery capabilities for integrated solutions."

Buy for a target price of Rs. 5,310

The brokerage has noted "We believe Mindtree has a resilient business structure from a long-term perspective and has built multiple long-term contracts with the world's leading brands. We believe Mindtree is well-positioned to capture the immense growth opportunity considering 1) Smooth transition of management; 2) Client focus for long-term sustainable growth ; 3) Margin tailwinds driven by cost efficiencies, INR depreciation, lower travel cost and 4) healthy cash flow generation. We recommend a BUY on the stock and assign 38x P/E multiple to its FY24E earnings of Rs 140.2/share to arrive at a TP of Rs 5,310/share."

Disclaimer

The stock has been picked from the brokerage report of Axis 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.