1.
MindTree
Gearing for cutting edge work
June 23, 2015
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Analyst Meet Update
Shashi Bhusan
shashibhusan@plindia.com
+91‐22‐66322300
Hussain Kagzi
hussainkagzi@plindia.com
+91‐22‐66322242
Rating BUY
Price Rs1,348
Target Price Rs1,500
Implied Upside 11.3%
Sensex 27,804
Nifty 8,382
(Prices as on June 23, 2015)
Trading data
Market Cap. (Rs bn) 112.8
Shares o/s (m) 83.7
3M Avg. Daily value (Rs m) 580.2
Major shareholders
Promoters 13.72%
Foreign 37.71%
Domestic Inst. 7.91%
Public & Other 40.66%
Stock Performance
(%) 1M 6M 12M
Absolute (7.1) 8.0 52.2
Relative (6.6) 6.9 41.1
How we differ from Consensus
EPS (Rs) PL Cons. % Diff.
2016 73.5 72.9 0.8
2017 88.3 87.5 1.0
Price Performance (RIC: MINT.BO, BB: MTCL IN)
Source: Bloomberg
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Jun‐14
Aug‐14
Oct‐14
Dec‐14
Feb‐15
Apr‐15
Jun‐15
(Rs)
We attended “Analyst Day” of MindTree (MTCL) today. Management highlighted
their key “Digital‐led‐growth” strategies. The company talked about gaining edge in
newer technologies (Digital, IoT etc), expertise led selling, and training workforce on
newer technologies. We believe Mindtree’s services and vertical portfolios are
poised for stronger growth. We continue to expect mid‐to‐high‐teen revenue growth
with stable operating margin. We retain our “BUY” rating.
 Growth driven by new technologies: According to Management, MTCL derives
~33% revenue from Digital. Moreover, the growth opportunities in newer
technologies like Digital (~$225bn by 2020E), IoT (ER&D spend ~$175bn) etc. is
likely to drive revenue momentum for the company. Mindtree has created
ecosystem of partnership for Digital (Intel, Cisco, Micosoft, SAP, ThingWorx),
Cognitive Computing (Universities, Start‐ups), and Autonomic Computing (IBM,
Microsoft) to exploit growth opportunities in these segments. There has been an
increase in Digital deal sizes, but no pricing premium. We expect unique
positioning to drive mid‐teens revenue growth in FY16
 Sales initiatives via leveraging new Digital world: Mindtree highlighted their
new sales approach for contracts outside RFP‐based. The company has imparted
one month training to its sales professional to use newer media (like LinkedIn)
to make sales pitch. The company is generating sales lead (through emails,
website, search engine marketing), and nurturing it (through Social Selling, E‐
mails, Calling). The company is going for aggressive outreach with newer
content. We see new‐age selling as an effective tool to generate new leads.
 Training employees for cutting edge technologies: Mindtree has built a new
training campus in Bhuvaneshwar (India) to train 2,500 software engineers on
cutting edge technologies. Moreover, the company is setting‐up a new campus
in Redmond (the US), after completing a fully operational campus in Gainesville
(the US) that house employees on processes like Agile, DevOps etc.
 Valuation & Recommendation – BUY, Target Price of Rs1,500: We reiterate our
‘BUY’ rating as we see stronger than industry growth for the company.
Key financials (Y/e March) 2014 2015 2016E 2017E
Revenues (Rs m) 30,316 35,619 40,775 47,511
Growth (%) 28.4 17.5 14.5 16.5
EBITDA (Rs m) 6,104 7,096 8,083 9,788
PAT (Rs m) 4,512 5,367 6,148 7,394
EPS (Rs) 108.2 64.1 73.5 88.3
Growth (%) 32.3 (40.7) 14.6 20.3
Net DPS (Rs) 12.0 10.0 8.0 10.0
Profitability & Valuation 2014 2015 2016E 2017E
EBITDA margin (%) 20.1 19.9 19.8 20.6
RoE (%) 30.5 29.4 26.9 25.6
RoCE (%) 30.1 28.9 26.5 25.3
EV / sales (x) 1.8 3.1 2.6 2.1
EV / EBITDA (x) 9.0 15.4 13.1 10.2
PE (x) 12.5 21.0 18.4 15.3
P / BV (x) 3.4 5.6 4.4 3.5
Net dividend yield (%) 0.9 0.7 0.6 0.7
Source: Company Data; PL Research

2.
June 23, 2015 2
MindTree
Income Statement (Rs m)
Y/e March 2014 2015 2016E 2017E
Net Revenue 30,316 35,619 40,775 47,511
Raw Material Expenses 17,820 20,744 24,305 28,020
Gross Profit 12,496 14,875 16,470 19,491
Employee Cost — — — —
Other Expenses 6,392 7,779 8,387 9,703
EBITDA 6,104 7,096 8,083 9,788
Depr. & Amortization 809 1,018 1,288 1,437
Net Interest 4 1 6 5
Other Income 496 835 1,094 1,132
Profit before Tax 5,787 6,912 7,882 9,479
Total Tax 1,275 1,545 1,734 2,085
Profit after Tax 4,512 5,367 6,148 7,394
Ex‐Od items / Min. Int. — — — —
Adj. PAT 4,512 5,367 6,148 7,394
Avg. Shares O/S (m) 41.7 83.7 83.7 83.7
EPS (Rs.) 108.2 64.1 73.5 88.3
Cash Flow Abstract (Rs m)
Y/e March 2014 2015 2016E 2017E
C/F from Operations 3,224 5,983 5,673 7,535
C/F from Investing (2,243) (2,098) (1,182) (1,378)
C/F from Financing (1,044) (1,382) (1,024) (837)
Inc. / Dec. in Cash (63) 2,503 3,467 5,320
Opening Cash 1,238 1,184 3,763 7,230
Closing Cash 1,175 3,763 7,230 12,550
FCFF 2,683 4,022 4,136 6,157
FCFE 2,461 4,018 4,136 6,157
Key Financial Metrics
Y/e March 2014 2015 2016E 2017E
Growth
Revenue (%) 28.4 17.5 14.5 16.5
EBITDA (%) 25.5 16.3 13.9 21.1
PAT (%) 32.9 18.9 14.6 20.3
EPS (%) 32.3 (40.7) 14.6 20.3
Profitability
EBITDA Margin (%) 20.1 19.9 19.8 20.6
PAT Margin (%) 14.9 15.1 15.1 15.6
RoCE (%) 30.1 28.9 26.5 25.3
RoE (%) 30.5 29.4 26.9 25.6
Balance Sheet
Net Debt : Equity (0.1) (0.2) (0.3) (0.4)
Net Wrkng Cap. (days) — — — —
Valuation
PER (x) 12.5 21.0 18.4 15.3
P / B (x) 3.4 5.6 4.4 3.5
EV / EBITDA (x) 9.0 15.4 13.1 10.2
EV / Sales (x) 1.8 3.1 2.6 2.1
Earnings Quality
Eff. Tax Rate 22.0 22.4 22.0 22.0
Other Inc / PBT 8.6 12.1 13.9 11.9
Eff. Depr. Rate (%) 10.3 9.4 10.8 10.8
FCFE / PAT 54.5 74.9 67.3 83.3
Source: Company Data, PL Research.
Balance Sheet Abstract (Rs m)
Y/e March 2014 2015 2016E 2017E
Shareholder's Funds 16,405 20,128 25,606 32,163
Total Debt 27 23 23 23
Other Liabilities 168 334 334 334
Total Liabilities 16,600 20,485 25,963 32,520
Net Fixed Assets 3,932 5,909 5,803 5,744
Goodwill — — — —
Investments 5,335 5,351 5,351 5,351
Net Current Assets 5,134 7,119 12,703 19,319
Cash & Equivalents 1,184 3,763 7,230 12,550
Other Current Assets 8,344 9,420 11,730 14,058
Current Liabilities 4,394 6,064 6,256 7,289
Other Assets 2,199 2,106 2,106 2,106
Total Assets 16,600 20,485 25,963 32,520
Quarterly Financials (Rs m)
Y/e March Q1FY15 Q2FY15 Q3FY15 Q4FY15
Net Revenue 8,435 8,886 9,117 9,181
EBITDA 1,685 1,755 1,866 1,786
% of revenue 20.0 19.8 20.5 19.5
Depr. & Amortization 228 235 260 295
Net Interest — — 1 —
Other Income 210 241 210 174
Profit before Tax 1,667 1,761 1,815 1,665
Total Tax 373 387 407 378
Profit after Tax 1,294 1,374 1,408 1,287
Adj. PAT 1,294 1,374 1,408 1,287
Key Operating Metrics
Y/e March 2014 2015 2016E 2017E
Volume (persons months) 97,203 110,209 124,536 143,217
Realization (US$ / Hr) 26.1 28.0 29.7 29.7
Currency (USDINR) 60.4 61.0 61.5 60.5
SW Devp. Cost (% of Sales) 58.8 58.2 59.6 59.0
SG&A (% of sales) 21.1 21.8 20.6 20.4
Revenue (US$ m) 502 584 663 785
EBITDA Margin Expansion/(Erosion) (bps) (46) (21) (10) 78
Tax Rate (%) 22.0 22.4 22.0 22.0
Source: Company Data, PL Research.

3.
June 23, 2015 3
MindTree
Prabhudas Lilladher Pvt. Ltd.
3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai‐400 018, India
Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209
Rating Distribution of Research Coverage PL’s Recommendation Nomenclature
42.7%
39.6%
17.7%
0.0%
0%
10%
20%
30%
40%
50%
BUY Accumulate Reduce Sell
% of Total Coverage
BUY : Over 15% Outperformance to Sensex over 12‐months
Accumulate : Outperformance to Sensex over 12‐months
Reduce : Underperformance to Sensex over 12‐months
Sell : Over 15% underperformance to Sensex over 12‐months
Trading Buy : Over 10% absolute upside in 1‐month
Trading Sell : Over 10% absolute decline in 1‐month
Not Rated (NR) : No specific call on the stock
Under Review (UR) : Rating likely to change shortly
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