MOSL: MINDTREE CONSULTING (Neutral)-Well placed to address the Digital opportunity-but status quo on near-term challenges

​(MTCL IN, Mkt Cap USD1.2b, CMP INR462, TP INR450, 3% Downside, Upgrade to Neutral)

• We attended MindTree's (MTCL) analyst meet, where the company highlighted its roadmap to capitalize on the Digital opportunity.
• Its differentiated approach in Digital is led by its holistic approach of [1] reimagining customer experience, [2] modernizing ecosystem and processes, and [3] harnessing the power of data.
• While several challenges, especially pressure in top customers and a steep decline in profitability continue to loom over the near-term, 40% revenue from Digital makes for a favorable long-term positioning. Over the past month, the stock has corrected by ~10%, factoring these in. Upgrade to Neutral.

Accelerated market shifts: The Indian IT sector has been witnessing a rapid change in traditional models, which are being transformed by the shift to packaged applications, insourcing/localization, introduction of new technologies like automation, IoT and cognitive, and new developments on the political front. These forces make way for a play in Digital, led by innovation and a partnership-led approach with customers.

Getting ready for the next phase…: MTCL unleashed its 3.0 strategy, which focuses on driving change to maintain Digital leadership. It is based on the pillars of:

• ​Accelerated growth through a focus on Digital packages and platforms
  
• Focused innovation for run and grow by creating a bi-modal sales, delivery and operating model
  
• Automation that balances itself with talent transformation
  
• A consulting-first approach to drive competitive advantage