LTIMindtree Ltd is likely to post a 10 percent sequrential decline in net profit in the second quarter of this fiscal, as revenue growth stayed muted and wage hikes have eaten into the margins.
The IT major is expected to report a 1.7 percent on-quarter rise in dollar revenue, with no cross-currency impact, according to a Moneycontrol poll of five brokerage estimates.
LTIMindtree is expected to report the Q2 FY24 revenue at $1.07 billion (about Rs 8,900 crore), and net profit at Rs 1,45.7 crore - down 10 percent on-quarter, and 12 percent on-year.
The EBIT margin at 15 percent is likely to shrink by 170 basis points QoQ and 255 basis points YoY due to higher wages, though some of this may be mitigated by better utilisation and operational efficiencies. Other major companies such as Infosys, HCL, and Wipro have chosen to defer these hikes.
BFSI, manufacturing and utilities are expected to perform well, while travel, transportation, hospitality and logistics are also projected to remain stable. Additionally, the order book is expected to be robust, despite a volatile demand environment.
Brokerage Anand Rathi said LTIMindtree is sees growth stagnation, but its strong client base is expected to support its recovery. The revival of certain BFSI projects and the recovery in the Hi-tech sector should contribute to this.
Analysts will keep an eye on the management's insights regarding demand and growth expectations for FY24. Investors are keen on how BFSI, hi-tech, and retail sectors are performing, the influence of economic challenges on demand, the effect of wage increases on margins, FY24 revenue projections, the performance of major accounts, investments in GenAI partnerships and solutions, recent contract wins, the deal pipeline, and any updates on merger synergies, employee addition and attrition.
Several analysts have recently warned that India's IT services firms, particularly in the CMT (communications, media, and technology) sector, may face challenges in 2QFY24 and FY24. They cite the lack of small and discretionary projects, client decision delays, and project ramp-up issues as potential causes for short-term revenue and margin problems.
This slowdown could affect FY24 and even spill into the FY25 discretionary spending. Analysts stress the need to watch for cost-cutting initiatives in company deal pipelines and project execution timelines, which will be crucial for investors.
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