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Mindtree share price jumps 9% post quarterly results; analysts remain mixed on outlook

Mindtree’s share price soared 9.3% on Wednesday to trade at Rs 2,728 per share as investors reacted to the more than 61.2% on-year jump in net profit of the IT company. While the stock price rose higher, analysts were mixed on the outlook as some advised selling the stock citing unsustainable margins, other asked investors to buy more shares banking on the accelerated digital adoption globally. Mindtree’s share price has soared 62% so far this year, in addition to the 136% rally in the stock between April and December last year.

The IT firm reported a net profit of Rs 343 crore in the April-June quarter, up 61.2% from last year’s Rs 213 crore. The company said it is witnessing broad-based growth across industries and services and that its deal pipeline continues to remain strong. Revenue grew 20% to Rs 2,291 crore from the year-ago period.

Kotak Securities – Sell

Fair value: Rs 1,900

The brokerage firm said that Mindtree’s Growth was led by a jump in short cycle programs and path towards normalization of spending in impacted travel vertical. Kotak Securities has raised EPS estimates by 5-6% and Fair Value to Rs 1,900 valuing the company at 20X June 2023E EPS. However, analysts are cautious about the “ unsustainable EBIT margin profile and rich valuations”. “EBITDA margin guidance of 20%+ seems unsustainable noting cost headwinds, likely decline in utilization rates and increase in travel and other discretionary costs,” they said.

ICICI Securities – Hold

Target price: Rs 2,375

Analysts at ICICI Securities said that revenue growth in the April-June quarter was largely in line with their estimates, but the quality of growth was weaker than usual. The brokerage firm said that the investor’s focus will likely shift to steady-state growth/margins in FY23 and ahead. Moderation in cloud activity, rise in the share of onsite effort and reversal of covid-led cost savings (e.g. travel) are the key headwinds to watch out for. “At 28x FY23E EPS, street is already factoring in mid-teens revenue growth with 20%+ EBITDA margin over the medium term. Scope for further surprises/upgrades are less likely,” they added.

Motilal Oswal – Neutral

Target price: Rs 2,620

Motilal Oswal sees positives in the quarterly results of Mindtree. “Since July 2019, after the disruption due to the ownership change, Mindtree has taken steps to stabilize its client and employee count,” they said. Although the brokerage firm sees limited upside potential, they believe the stock is fairly valued. “The key positives are already captured, and we see limited upside hereafter. Our TP of INR2,620 per share implies 26x FY23E EPS,” they added.

HDFC Securities – Add

Target price: Rs 2,635

Seeing Mindtree’s strong performance, HDFC Securities said revenue outperformance in Q1, all-time high bookings and hiring reflecting strong demand, and improving revenue profile (broad-based). “Mindtree’s growth mix has improved in recent times (vs. a skewed profile earlier), led by interventions to drive large/annuity deals,” HDFC Securities said. The brokerage firm values Mindtree at 28x Jun-23E EPS.

Eqwires Research Analyst

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Sebi levies nearly Rs 23 lakh fine on 16 entities

Markets regulator Sebi has imposed a total fine of nearly Rs 23 lakh on 16 entities for violation of market norms while dealing in the scrip of Timbor Home Ltd.

The entities entered into off-market transactions without making the payment of considerations within the timeline as stipulated under the Securities Contracts Regulation Act (SCRA).

In another investigation conducted by Sebi in the scrip of Timbor Home between April 2014 – May 2015, 21 entities who were allegedly connected and had allegedly acted in concert as part of a scheme to plant unsolicited and misleading advice, recommending purchasing the company’s shares to induce unsuspecting investors to buy the scrip and thereafter offloading a large number of shares in the secondary market pursuant to such misleading recommendation.

The modus operandi included the off-market transfer of shares of Timbor Home by certain promoters of the company to other connected entities and in turn, the connected entities sold the shares in the market.

Analysing the data regarding off-market transactions, Sebi noted that the off-market dealings of the entities in the scrip of Timbor Home were not in conformity with the SCRA norms.

Besides, certain entities also failed to furnish the information sought by the regulator.

For violation of market norms, the 16 entities are facing a fine in the range of Rs 1 lakh to Rs 2.2 lakh.

In a separate order, Sebi has warned Shri Parasram Holdings Pvt Ltd “to exercise caution, care and due diligence in its future conduct as a stockbroker in all its dealings with its clients and to ensure compliance with the applicable laws at all times in future”.

The order came after Sebi inspected the books of accounts and other records of the broker for the period April 1, 2012, to January 20, 2014, to verify whether it had complied with the regulator’s circular.

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IndiGo, SpiceJet share prices surge up to 5% after Civil Aviation Ministry increases flight capacity to 65%

IndiGo, Spicejet and other airline share prices surged up to 5 per cent on BSE on Tuesday, a day after the Ministry of Civil Aviation raised the flight capacity allowance to 65 per cent. Analysts say even though the aviation ministry increased flight capacity to 65 per cent, rising fuel prices, slack monsoon period and fear of an impending third Covid-19 wave could dampen the upward momentum for airline stocks. Barring Jet Airways share price, which hit a 5 per cent lower circuit at Rs 108.45 apiece, all the airline stocks were trading in green.

InterGlobe Aviation shares surged 3 per cent, Spiecejet nearly 4 per cent, Global Vectra Helicorp 5 per cent and TAAL Enterprises 4.3 per cent. In comparison, BSE Sensex was up 78 points at 52,958 levels. The Civil Aviation ministry in its tweet said considering the increasing passengers’ demand for domestic air travel, the capacity of domestic civil aviation operations will be increased to 65 per cent from 50 per cent from the date of issue of this order and upto 31.07.2021 or until further orders. “Technically, IndiGo share price faces strong resistance at Rs 1,813. Similarly, SpiceJet faces strong resistance at Rs 84. Close above these levels only could trigger a strong up move,” AR Ramachandran, Co-founder & Trainer, Tips2Trades, told Financial Express Online.

The airline stocks have witnessed a rebound with partial resumption of travel and amid mass vaccination drive. The recent increase in flight capacity from 50% to 65% may further add some tailwind, said an analyst. “However, it’s an industry we would like to avoid considering a potential third wave. Not to mention that barring Interglobe Aviation, there was no comfort on the fundamentals front in aviation stocks in the pre-pandemic period. The stock of Interglobe Aviation is close to its lifetime high, touched in the year 2019, offering no valuation comfort,” Richa Agarwal, Senior Research Analyst, Equitymaster, told Financial Express Online.

Carriers have been operating with only 50 per cent of their pre-COVID domestic flights since June 1 in accordance with a May 28 order of the ministry. The May 28 decision to bring down the cap from 80 to 50 per cent was taken on the back of a sudden surge in the number of active COVID-19 cases across the country, decrease in passenger traffic and the passenger load (occupancy rate) factor.

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Tata Motors share price continues rallying, gains 84% so far this year; outperforms benchmarks

Tata Motors share price has soared 7.5% in the last one month, extending its monstrous rally following the March 2020 sell-off. The stock had tanked 66% in March 2020, only to rally 425% since then as the bulls started asserting control on Dalal Street. On Tuesday Tata Motors shares were trading flat with a positive bias at Rs 343.85 apiece, up 84% so far this year, outperforming benchmark indices. Earlier this month on June 15, Tata Motors hit a fresh 52-week high of Rs 360.55 per share. Tata Motors has a market capitalization of Rs 1.13 lakh crore.

Tata Motors Historical Price: Tata Motors Share price in the last 10 trading session
The share price of Tata Motors has slipped marginally over the last 10 trading sessions. On June 15, Tata Motors share price hit a fresh 52-week high resulting in some profit booking. However, the stock been gaining for consecutive trading sessions since last Thursday. On Tuesday, Tata Motors share price was up 0.22% at Rs 343.85 per share.

The fall in stock price only paves the way for an attractive entry opportunity into the stock. Domestic brokerage firm ICICI Direct advises investors to buy the stock in the range of Rs 348-358 per share, for a target price of Rs 405 per share. A stop loss of Rs 324 apiece has been recommended. “The stock recently registered a breakout above the last four month’s consolidation range (Rs 342- 279), thus opening upside towards Rs 405 levels as it is the measuring implication of the recent range breakout (342-279=63 points) added to the breakout area of Rs 342 signalling upside towards Rs 405,” ICICI Direct said. ICICI has given a three-month duration for this trade to play out.

Tata Motors History and Company profile
Tata Motors is the automobile unit of the Tata Group. The company manufactures passenger cars, trucks, coaches, buses, sports cars, construction equipment and military vehicles. Formerly known as Tata Engineering and Locomotive Company (TELCO), the company was founded in 1945. Tata Motors manufactured its first passenger vehicle in 1991. Tata Motors also owns South Korean truck manufacturer Daewoo and the British luxury vehicle manufacturer Jaguar Land Rover.

Recently, Tata Motors have renewed their offerings in the passenger car segment with the launch of cars such as Tata Tiago, Tata Tigor, Tata Nixon, Tata Harrier, and Tata Altroz. Earlier this month, Tata Motors announced that Both the Jaguar and Land Rover brands would undergo transformation by electrification – six new all-electric Land Rover models would be introduced in the next five years and Jaguar would be completely reimagined as a purely electric brand from 2025.

Eqwires Research Analyst

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