Mindtree Ltd Revenue Growth Momentum Intact; Tight Job Market To Weigh On Margins

 ■    Q1FY22 revenue performance was ahead of our expectations, while margins came in a tad lower. Revenue grew 7.7% QoQ to USD310.5mn. EBITDAM declined ~160bps QoQ to 20.3% due to higher subcontracting costs and hiring costs (record net add in Q1).

■    The company is confident of delivering industry-leading double-digit revenue growth on the back of strong deal wins, healthy deal pipeline and recovery in BFSI and TTH verticals. MTCL expects to sustain EBITDAM at over 20% in FY22.

■    Deal wins remained solid in Q1 at USD504mn. Management indicated that the deal intake remains well-balanced across annuity and transformational deals, and the deal pipeline remains healthy despite strong deal closures, giving confidence in growth sustainability.

■    We raise our FY22E/23E/24E EPS by 2.4%/1.6%/1.3%, factoring in Q1FY22 performance. We maintain Sell on the stock with a revised TP of Rs2,200 at 25x Jun'23E earnings (earlier Rs2,180), considering rich valuations and anticipated pressure on margins.