Mindtree's growth trajectory expected to lower following stellar show in FY19 (year of rev acceleration and margin expansion) as growth dichotomy between top account (36% CAGR over FY16-19) and residual biz (8% CAGR) normalises. The risk of high velocity (attrition) and low velocity (client metrics) cannot be ignored in the current scenario. FCF conversion also moderated on higher capex. We expect USD rev/EPS at 12/14% CAGR over FY19-21E, however at ~17x FY21E (vs. 13.5x for midcap IT) upside seems capped. We maintain NEUTRAL on Mindtree following inline 4QFY19. Our TP is Rs 1,040 implying 18x FY21E, with ~2% change in est.

Inline operating performance; FY20 outlook no surprise Mindtree (MTCL) posted above-estimated revenue growth but below-par EBITDA margins in Q4FY19, making for an in-line operating performance. Q4 deal wins were soft. Management is targeting growth in the low teens and 100-120bps margin expansion in FY20 (vs. 13.3% CC growth and +80bps estimated). We trim FY20E/FY21E EPS by ~2% on lower other income and cut our rating from ADD to REDUCE on risks of operational performance slippage amid L&T;'s unsolicited...

Mindtree (MTCL) posted above-estimated revenue growth but below-par EBITDA margins in Q4FY19, making for an in-line operating performance. Q4 deal wins were soft. Management is targeting growth in the low teens and 100120bps margin expansion in FY20 (vs. 13.3% CC growth and +80bps estimated). We trim FY20E/FY21E EPS by ~2% on lower other income and cut our rating from ADD to REDUCE on risks of operational performance slippage amid L&T;'s unsolicited bid. Rolling valuations over, we have a Mar'20 target of Rs 990 (vs. Rs 1000)....

18 April 2019 FY19, MTCL grew its constant currency (CC) revenue by 19.2% YoY, accelerating by over 2x from 9.3% YoY growth in FY18. EBITDA margin expanded 160bp YoY to 15.2% in FY19, driving EBITDA growth of 44% YoY. Adj. net income, thus, grew 55% YoY. MTCL announced a total dividend of INR33/share, taking its payout to 72% of FY19 earnings. For 4QFY19, MTCLs revenue growth of 3.9% QoQ CC (+17.9% YoY CC) was marginally ahead of our estimate of +3.1%. EBITDA margin shrank 70bp QoQ to 15.2% (in line) in the quarter. PAT increased 15% QoQ (+17% YoY) to INR1.

With low exposure to legacy (~16% of rev), Mastek generates low teen margins, given higher on-site revenues and effort mix. We like its success in ramping up UK Govt digital business. Mastek is the only only Indian co in their top-10 vendor list. Co can generate 14.0/13.4% GBP rev/EPS CAGR over FY19-21E (despite US softness and Brexit worries). Its stake in Majesco US (Rs 83/sh) and net cash (Rs 63/sh provide additional comfort. Risks to our thesis include deferment of spend due to Brexit and GBP depreciation. We maintain BUY on Mastek following an inline 4QFY19. Our SoTP is Rs 657 implying 11x FY21E EPS which includes Rs 83/share for 12% stake in Majesco US.

We attended Dilip Buildcon's analyst meet in Goa and visited the under construction site at Zuari bridge & Goa airport on 5th/6th April 2019. Execution of both projects are in high gear and expected to complete Zuari bridge by October 2020. Whereas,...

TV18 reported its Q4 FY19 results with a consolidated net revenue of INR 11,815 Mn, a decline of 20% qoq. EBITDA stood at INR 517 Mn in Q4FY19 . EBITDA Margins were reported at 4.37% in Q4 FY19 vs a margin of 7.78% in Q3 FY19. EBIT came in at INR 173 Mn. Net Profit for Q4 was reported at INR 282 Mn. EPS for the quarter stood at INR 0.16 vs INR 0.02 in the previous quarter....

Dixon has acquired an additional 50% stake in Padget Electronics Pvt. Ltd., the JV for mobile manufacturing in which Dixon already owns 50%. After the transaction, Padget has become a wholly owned subsidiary of the company. Dixon valued Rs270mn as the consideration for the stake, valuing Padget at 2.6x FY19 EBITDA. The net cash payout stood at Rs110mn. The deal should lead to incremental revenues of Rs3.4bn/3.7bn for Dixon's in FY20/FY21E, with EBITDA of Rs84mn/92mn. marquee customer additions will drive revenue sustainability for Dixon. Note that we have now incorporated 100% of Padget Electronics into our estimates....

Revenue in constant currency terms grew 11.7% yoy to USD 3,060mn in Q4 FY19 (up 2.1% qoq) which was above our estimates of $3,031 mn. The revenue growth was supported by improvement in global IT spending environment across key verticals, especially Communications and Healthcare. Operating margin of 21.4% in Q4 FY19 was down 113 bps qoq (down 191 bps yoy) impacted by higher direct cost % of revenue. By Geography: North America remained strong with 3.7% qoq in revenue on CC basis while Europe business advanced 1.4% qoq. 4QFy19 revenue from India/rest of the world declined 9.1%/1.3% qoq, respectively. By Industry: BFSI remained under pressure with revenue on cc basis down 0.8% qoq while Retail declined 0.9% qoq. However, Communication vertical saw a robust growth of 16.6% qoq. By offering: Digital Revenues (33.8% of total business) registered a strong 9.7% qoq growth (+41% yoy) while the Core business was down 1.4%...

Refer to important disclosures at the end of this report A rejuvenated 2019; reiterate Buy APAT has announced the acquisition of a 200k ton plant in Hyderabad from Shankara Building Products for Rs700mn after a solid 4Q sales volume growth (+39% yoy). APAT's total capacity is now 2.3mn tons, which is 28% of the Indian steel pipe industry. Key benefits from this plant are: high-margin products of 155k tons, reduction in logistics costs for Andhra Pradesh market and 29acres of land area (viable for future expansion). To add, Shankara will buy 250k tons of pipes from APAT annually....

P/E Discount Reduction Trade With TCS Will Stall Near Term We believe the 7.5%-9.5% constant currency (CC) revenue growth guidance for FY20 (inclusive of inorganic elements) of Infosys looks a bit conservative with: (1) total large deal TCV in FY19 at >2x that of FY18 and new deal TCV at 3.4x and that too spread across multiple verticals. (2) Double-digit exit revenue growth (YoY) in 4QFY19. But 4QFY19 exit EBIT margin (21.4%), 70bps below our estimate of 22.1%, does open up possibility of it landing at bottom end of the guided range (21%-23%) for FY20 considering likely lack of support from INR depreciation (at 210bps in FY19) and with more monetary interventions required to curb the...

Sanofi India's (SIL) revenues in CY18 stood at Rs27,708mn, showing a growth of 11% compared to a year ago. The revenue mix witnessed a sharp change in favour of exports. The share of exports in total revenues increased to 30% from 26%. Exports grew 25% YoY, while the domestic business underperformed because of price cuts and potentially a correction in channel inventory. We believe the 100bps decline in gross margin on YoY basis can be primarily attributed to a higher share of export sales, which are associated with higher raw material costs. Apart from a rising share of exports, the company also went for price cut of Amaryl, which is one of the top brands in SIL's portfolio. Amaryl witnessed price cuts in some of its extension brands...

Infosys's Mar'18 quarter performance was mixed bag with inline revenue, healthy deal wins and subpar operating margins. Combination of soft revenue growth guidance (of 7.5 to 9.5% YoY cc growth) with lower reset of EBIT margin range (to 21-23%) makes FY20 outlook subdued. Tight US talent market and elevated attrition will limit efforts to recoup profitability. We downgrade recommendation a notch to ADD (V/s BUY earlier) even as...

Infosys reported inline Q4FY19 revenue performance but sharp miss on Change in Estimates | Target | Reco margins due to large deal impact & investments on people. Management guided a lower than expected revenue growth for FY20E due to uncertain...

TCS' growth and scale leadership in digital (USD 6.7bn annualized) are key differentiators. Continuity in strong deal wins, broad-based growth across verticals (esp. core) and geographies are driving double-digit growth. Margin/attrition differential vs. peerset reflects superior execution. Payout policy (80-100% of FCF), 90% FCF/PAT, ~4% FCF yield and 11/10% USD rev/EPS CAGR over FY19-21E support valuations (currently at 20x FY21E). We maintain BUY on TCS following an inline 4QFY19. Our TP is Rs 2,410 implying 24x FY21E EPS, with ~1% change in est. TCS is our top large cap IT pick.

Infosys' softening FY19 margin trajectory (-150bps vs. +80bps for TCS despite INR tailwinds), is expected to continue over FY20 (-160bps erosion). This derives from a rising cost of delivery (higher localisation, sub-contracting) and the persistent challenge of high attrition, large deal investments and softness in the core BFSI vertical. We downgrade Infosys to NEUTRAL (from BUY) post its inline revenues in 4QFY19. The growth challenges and margin trajectory compels us to cut estimates by ~5%. Our TP falls to Rs 755 (Rs 805 earlier) at 18x FY21E EPS.

13 April 2019 full-year CC revenue growth of 9%, EBIT growth of 10.6% (EBIT margin shrank 140bp YoY) and adj. Including the buyback/special dividend, INFO paid out ~125% of its FY19 adjusted profits. For the quarter, INFO grew its revenue by 11.8% YoY CC, EBIT by 3.3% YoY CC and adj. net income by 10.5% YoY CC. QoQ CC revenue growth of 2.1% was in line, but the EBIT margin drop of 160bp QoQ (on adjusted 3Q base of 23%) was higher than anticipated (by 100bp). PAT of INR4.07b exceeded our estimate by 1.5% due to a lower tax rate (22.

View: Margin concern continues; downgrade to SELL We believe that higher sub-contracting cost, higher attrition, implied investment and localisation in the medium term will lead to margin pressure in FY20 for INFY. We expect INFY to report margins towards the mid-point of its guidance in FY20. We downgrade our earnings estimates by 12%/11.5% for FY20/FY21, primarily because of rupee appreciation and margin headwinds going ahead. We change our rupee assumption to ` 70 for FY20/FY21 as compared to ` 74/` 76 earlier which led to major...