Mindtree to declare Q1 results today; here's what leading brokerages expect

Mindtree, the mid-sized IT services firm, is slated to announce its June quarter (April-June) results for the financial year 2019-20 (FY20) on Wednesday. It will be the first corporate results announcement by the company since the engineering and construction major Larsen & Toubro (L&T) got into the driver's seat with 60.06 per cent stake. 

In its annual general meeting (AGM) held on Tuesday, the shareholders of Mindtree, including the new promoter Larsen and Toubro (L&T), approved the proposal for a special dividend of Rs 20 per share for FY2019. L&T's Managing Director (MD) & Chief Executive Officer (CEO) SN Subrahmanyan said that Mindtree is not being snatched but has come under a bigger tree called L&T. 

“We have already stated that Mindtree will be run and traded under the same name. What will happen in the future that I can’t predict. We have three IT companies out of which two are listed. This will be the fourth one and it will continue to be like that,” Subrahmanyan said. He added: “Also, the registered office of Mindtree will continue to remain in Bengaluru.” 

It must be noted that earlier this month L&T acquired control of the company with a 60.06 per cent stake and was categorised as promoter.READ MORE

For the quarter ended June 30, 2019, Mindtree is expected to post revenue growth of 1.4 per cent on QoQ (quarter-on-quarter) basis in US dollar terms. On YoY basis, the number is likely to grow 10 per cent to $265.7 million, say analysts at Nirmal Bang Securities. Revenue in constant currency (CC) terms is pegged to grow 1.65 per cent QoQ. 

In rupee terms, revenue is expected to rise 12.8 per cent YoY and 0.5 per cent QoQ to Rs 1,639.5 crore. PAT (Profit after tax) or net profit will rise 16 per cent YoY to Rs 183.6 crore. On QoQ basis, the figures are expected to fall 7.5 per cent. 

Mindtree had reported 8.9 per cent YoY growth in its consolidated net profit at Rs 198.4 crore for the March 2019 quarter. For the June quarter of 2018-19, the firm had reported PAT of Rs 158.2 crore.  

In the first quarter of FY19 (Q1FY19), shares of Mindtree have slipped around 2 per cent as against nearly 2 per ceny rise in the Nifty IT index. The benchmark Nifty50 index has gained around 1.50 per cent during the period. 

"US dollar revenues are anticipated to grow 1.5 per cent QoQ to $266 million while rupee revenue may grow 0.5 per cent QoQ to Rs 1,849 crore. EBITDA (earnings before interest, tax and amortisation) margins may dip 80 basis points (bps) QoQ to 14.4 per cent, mainly owing to partial wage hike and rupee appreciation, says ICICI Securities in its results preview note. 

Analysts at Kotak Securities see a decline of 200 bps in EBIT margin. "We expect weak TCV of deal wins. Uncertainty on outcome of L&T bid has distracted management and could have potentially impacted client decisions," they say. 

Improvement in IBM business, client mining opportunity and margin trajectory are the key things investors will watch out for.

"Mindtree had raised red flags on demand because of Brexit and other macro factors. Need to see if this plays a role in the revenue slowdown," Nirmal Bang Securities say. The BFSI segment’s EBITDA margin needs to be watched in 1QFY20, the brokerage added.