March 8, 2018 / 6:59 AM / 9 months ago

BUZZ-HSBC raises TP for India's Mindtree, says margin recovery to continue in Q4, FY19

** IT firm Mindtree Ltd’s EBITDA margin recovery may continue in Q4 and FY 2019 post hitting a bottom in Q1, led by revenue growth and operational cost cuts, HSBC Global Research says in a note

** Mindtree’s EBITDA margin to rise to 16.5 pct in FY19, led by operational cost improvements in the core business and further improvement in the subsidiaries such as Bluefin and Magnet - HSBC

** With the recent pick-up in revenue growth momentum and better visibility on margins, HSBC raises Mindtree’s forward PE multiple to 18x, in-line with larger peers Infosys Ltd and Tata Consultancy Services Ltd

** Mindtree’s 12-month forward PE ratio is 28.61x, Infosys has 16.39x and TCS has 22.98x - Thomson Reuters Eikon data

** Assuming revenue from large clients will now be stable, the recent total contract value signing do support 13-14 pct growth in FY19 - HSBC

** Delay in deal ramp-up and weak macro environment remain downside risks for Mindtree, HSBC writes

** HSBC raises target price on stock to 730 rupees from 500 rupees; keeps “hold” rating with downside of 11.6 pct as the stock is trading at a significant premium to its peers

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