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Mindtree margin expansion stands out compared to large size peers

News: Mindtree reported a strong set of Q3FY22 numbers both on revenue as well as margins. The company reported constant currency growth of 5.2% QoQ while dollar revenue grew 4.7% QoQ to US$366.4 mn. Growth was driven by technology, media & services (up 6.1% QoQ), BFSI (up 4.7% QoQ) and travel & hospitality (up 7.0% QoQ). In terms of geographies, growth in revenues was led by US and  APAC, which was up 4.9% QoQ and 15.7% QoQ. The company reported EBITDA margin expansion of 100 bps QoQ to 21.5% for the quarter. Order book was at US$358mn , up 14.6% YoY while cash and investments were at all-time high of US$412.7 mn.

Views: The margin expansion could be attributed 60 bps to operating efficiency and 40 bps to currency tailwind. Margin expansion was a key highlight of the quarter when its large size peers feeling the cost pressures due supply side challenges. The company’s better control on sub costs (it has come down from 11.2% of sales in Q1FY22 to 9.7% of sales in Q3FY22) has been helping margins.

Impact: Positive