Mindtree shares end nearly 4% lower despite strong q1 numbers—What brokerages recommend?

Shares of Mindtree closed with a cut of nearly four per cent on Thursday even as the IT company posted robust q1fy23 earnings on the back of strong growth and a healthy order book. The quarter witnessed strong order intake with the TCV deal wins of USD 570 Mn, up 13.1% YoY, while Growth was broad based across segments as well as geographies. On Thursday's closing price, the IT stock was trading at 45% discount from its 52-week high.  

The company is expected to maintain a stable margin profile in FY23, despite elevated attrition and supply-side pressures, given the exceptional start to the year (21.7% comparable EBITDA margin) unlike its peers. 

A day after the Mindtree announced the results for the quarter ending on June'22, the brokerage houses remained divided on the future action in the share price of the counter.  

The most aggressive target was put out by global brokerage Morgan Stanley. It retained its 'Equal Weight' rating on Mindtree with a target price of Rs 4450 per share in one year time frame. On Wednesday's closing price, this is an upside of 53.5%.  

Meanwhile, Choice Broking sees a potential return of 50.5% on the record price. "On the basis of better-than-expected performance and greatly enhanced future prospects due to synergies arising from the upcoming merger with LTI, we upgrade our target price to Rs 4365," it said.  

However, it stated that it is valuing Mindtree as a standalone entity and assuming that post the LTI-Mindtree merger, the current shareholder will be able to target an equivalent upside. 

Saying the company presented a strong all-round performance but is valuations rich, Motilal Oswal maintained neutral rating on the counter.  

"As the key positives are already captured, we see limited upside hereafter. Our TP of INR3,020 per share," said Motilal Oswal. 

It was of the view that it assigned neutral rating on Mindtree due to fair valuations and softness in retail and constrains on management bandwidth due to its impending merger with LTI. 

Another global brokerage, UBS, recommended a 'Sell' with a target price of RS 2700, while Jefferies gave an 'underperform' rating and stuck to the old target price of Rs 2490. Nomura raised its target price from Rs 2830 to Rs 2910, however, retained neutral rating on the counter.  

Meanwhile, shares of Mindtree closed lower by 3.93% to Rs 2785.55 per share on the BSE on Thursday.