Recommendation From IT Consulting & Bank Sectors
The scrips in this column have been recommended with a 15-day investment horizon in mind and carry high risk. Therefore, investors are advised to take into account their risk appetite before investing, as fundamentals may or may not back the recommendations.
MINDTREE
CMP - Rs 1057.75
BSE CODE 532819
Volume 121,253
Face Value Rs 10
Target Rs 1155
Stoploss Rs 982
Mindtree, an international IT consulting and implementation company, is engaged in providing business solutions through global software development. The company generates its revenue from RCM (24%), BFSI (22.5%), TMS (37.6%), TH (15.9%) in Q4FY18, wherein the US contributed 71%, Europe 21.1% and India 3.2%. The company’s contract closures exceeded USD 1 billion in FY18. The company’s attrition rate stood at 12.5% in Q4FY18 from 15.1% in Q4FY17 and registered its lowest rate since Q3FY14. The employee utilisation level too shows an increasing trend from 70.9% in Q4FY17 to 73.8% in Q4FY18. The company witnessed revenue growth of 4.3% and 36.4% PAT growth in FY18 and 6.3% and 29% QoQ in Q4FY19, respectively. The onsite revenue decreased from 60.5% to 58.9% YoY, while the offshore grew to 41.1% from 39.5%. Moreover, fixed cost and fixed monthly project revenue grew to 56.8% from 52.8% YoY, while time & materials project revenue decreased to 43.2% from 47.2%. Going forward, the company is expected to post YoY growth in revenue and PAT in Q1FY19. We recommend a BUY.
YES BANK
CMP - Rs 384.25
BSE CODE 532648
Volume 490500
Face Value Rs 2
Target Rs 417
Stoploss Rs 355
Yes Bank is a private sector bank with superior asset quality and strong fundamental parameters. The bank posted best-in-class quarterly performance in the banking sector in Q4FY18. The bank also posted highest growth in advances at 54 per cent YoY. Also, the lowering of slippages will aid smaller NPAs and lead to declining provisions going forward. Being the fourth largest private sector bank, it garnered 2.4 per cent market share in advances and 1.4 per cent in deposits. Further, it boasts one of the best capital adequacy ratio of 18.4 per cent (CAR Basel III) which gives confidence about further advances growth. The absolute GNPAs/NNPAs declined by 11.7 per cent and 17.7 per cent QoQ, which shows steady performance. The bank is emphasising on improving its retail lending share and aiming to make the portfolio more granular and judicious. Owing to this, the bank will continue to maintain its leadership position. The rising interest rate scenario will remain key risks on the margins due to rising borrowing costs of deposits. We recommend a BUY.