Mindtree EBITDA margins up 210 bps for Jun-21 quarter at 20.3%

For the quarter ended Jun-21, Mindtree announced financial results on 13 July. Mindtree, currently owned by the L&T group, has a dominant franchise in the CMT (communication, media, telecom) as well as the RW (retail, warehousing) verticals. BFSI is much smaller in the case of Mindtree, unlike many traditional IT companies in India.

Here is a gist of the Mindtree quarterly numbers.

_{Data Source: BSE filings}

Top line gets a boost on yoy basis
Consolidated sales revenues for the Jun-21 quarter were up 20.1% yoy at Rs.2,292 crore. Mindtree also saw limited impact of COVID 2.0 as its revenues were up 8.65% on a sequential basis compared to top line revenues of Rs.2,109 crore in the Mar-21 quarter. For the first time, Mindtree crossed the psychological $500 million mark in terms of order book position during the Jun-21 quarter. In fact, the order book grew 34% over Mar-21 quarter to $504 million. 

Read: Result Expectation of Top IT Companies

In terms of revenue mix, the Jun-21 quarter was dominated by the CMT vertical accounting for 45.4% of revenues. While retail accounted for 22.1% of the top line, BFSI was just about 18.2%. North American continues to predominate the revenue mix with 77% share of total revenues, with the balance 23% distributed among Continental Europe, UK and Asia Pacific regions. Revenue thrust was also sustained by comparatively lower attrition at 13.1%.

On the operating front, the growth came from a mix of higher revenue clients, better product mix and cost controls initiated in the last one year. In fact, consolidated operating profits were up 55% yoy at Rs.406 crore. As of Jun-21, Mindtree had over 260 active clients which positively impacted the operating performance with more premium clients ensuring better ROI. EBITDA grew by 33.6%, while EBIT was up by 40% on a yoy basis. For the Jun-21 quarter, Mindtree reported EBITDA margin at 20.3%, compared to 18.1% in Jun-20. However, the EBITDA margins were lower on sequential basis. This still places the EBITDA margins of Mindtree well below the EBITDA margins reported by the frontline IT companies like TCS and Infosys, which are closer to 25% on an average over the last few quarters. Check TCS Q1 Results

For the Jun-21 quarter, Mindtree reported net profits of Rs.343 crore; up by 61.22% on a yoy basis. The big thrust to the bottom line came from improved EBITDA and EBIT margins on a yoy basis. While sequential EBITDA margins may have been lower, the sequential net profits were higher by 8.23% on the back of cost efficiencies. For the Jun-21 quarter, Mindtree reported net profit margins of 14.98%; an improvement of 382 bps on a yoy basis. Overall, Mindtree has reported robust profit numbers as well as strong growth in top line across verticals.

Brokerage view are mixed about Mindtree. Among global brokerages, Morgan Stanley has an Overweight rating on Mindtree, Goldman Sachs has a Buy rating but Citi has a sell rating. Rich valuations have been one of the concerns over Mindtree. Among domestic brokerages, Edelweiss has maintained its Buy rating while ICICI Direct has upgraded Mindtree from Hold to Buy. However, Emkay Global has maintained its Sell recommendation due to rich valuations.
 

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