LTIMindtree, an IT service provider, experienced revenue increase of 22% YoY to Rs 7,128 Crore and 12 percent year-on-year increase to Rs 8,586 Crore while their consolidated profit remained consistent at Rs 1,114 crore versus Q4FY22 at Rs 1,108 crore.
Due to delays in decision-making and an increase in pass-through revenues, we anticipate flat revenue growth in Q1FY24 due to these challenges, resulting in our estimate that FY24 revenues may grow at 9.2 percent year over year compared to LTIM’s expectations for double-digit increases.
IDBI Capital upgraded the stock to ‘buy,’ setting a price target of Rs 4,975 after the company announced its fourth quarter results. IDBI Capital analysts expect that the company will return to a growth trajectory of 15 percent in FY25, primarily due to an increase of large deals, conversions of deal pipelines to revenues, upsells and cross-sells, and mining of clients. They also expect 138 basis points of margin improvement over FY23-25. This will lead to a CAGR in revenue and profit of 12 and 15 percent respectively.
HDFC Securities assigned LTIM a ‘Buy’ rating with a target price of Rs 5,090, noting its weak revenue performance relative to other tier-1 IT peers but strong sequential growth. HDFC Securities expects LTIM’s growth premium against these peers will remain competitive while also growing market share within India’s Tier 1 IT segment, representing only 5% but with 9% share in incremental growth.
Kotak Institutional Equities, however, is not as optimistic. The stock has been given a “reduce” rating with a target price of Rs 4,500. It said that Q4 revenues missed expectations, while margins were in line. Revenues were affected by delays in ramping up deals and extended furloughs within the hi-tech sector. The brokerage believes that management’s guidance is aggressive and anticipates a slow beginning to FY24. On demand headwinds, the brokerage has reduced its FY25 revenue and EPS estimates by about 1 percent.
Motilal oswal, a domestic brokerage firm, maintains a neutral stance with TP at Rs 4,650. While we view the $2.6 billion in order inflow over 2HFY23 as positive (1.2x Book to Bill), our FY24 USD revenue estimate (9.5 percent in CC YoY) is lower than company’s guidance due to the weak start of FY24 and uncertain macro-environment,” it stated.
“We continue to believe that LTIM is well placed to gain from a healthy mix of cost-takeout deals and transformation spend and expect a strong recovery in FY25 despite the larger scale after the merger between LTI and Mindtree”
On 28-April-2023, the NSE was trading LTI MindTree at Rs 4,364, up 1.02 percent.