MindTree reported in-line revenue growth of 1.7%QoQ to Rs3,912mn due to volume growth of 2%QoQ after loss of revenue from Kyocera. EBITDA margin at 11.2% was lower than expectation. High forex gain led to EPS of Rs7.8 (5%QoQ growth).

Robust growth in IT Services but PE Services still sluggish In dollar terms, IT services grew 5.4%QoQ, PE Services grew 1.7%QoQ and NIW declined 57%QoQ due to loss of revenue. Overall pricing declined -0.3%QoQ. Overall EBITDA margin declined 40bpsQoQ to 11.2%, despite rupee depreciation and absence of product business’ restructuring cost of USD3.2mn in Q3FY11.

Maintenance & Package Implementation leads growth

Application maintenance grew 12%QoQ and package implementation grew 11.7% due to rise in discretionary spending. Application development contributed 42.9% 270bpsQoQ decline) to revenue. IMS grew 2.4%QoQ.

Europe strong but US muted; Manufacturing outperforms

Europe grew 14.2%QoQ whereas US grew just 0.5%QoQ, a similar performance compared to Q3FY11. Rest of world declined 22%QoQ due to Kyocera revenue loss of USD2.5mn. Manufacturing led the performance with 7.2%QoQ growth. BFSI grew 1.7%QoQ.

Attrition rate increased – to hire 4,000 in FY12

Net employee decline of 124 in Q4. The attrition rate continues to be high at 25.1% (90bpsQoQ increase). Utilisation rate (incl. trainees) increased 160bpsQoQ to 70.9%. It added 39 new clients in Q4. Fortune 500 clients count was 48.

Outlook and valuations - The loss of revenue from Kyocera will pull down the business volumes for FY12. However, the margin decline in Q4FY11 was higher than expectation particularly when there were no losses in products. The revenue growth in IT services is likely to be good but margin pose concern.