Neutral LTI Mindtree; target of Rs 5,020: Motilal Oswal

Motilal Oswal's research report on LTI Mindtree

LTIMindtree (LTIM)’s revenue declined 1.3% QoQ CC in 4QFY24 vs. our estimate of 1.4% QoQ CC growth. The growth was hit by two project cancellations in BFSI as clients reprioritized their spending. However, deal wins were strong at USD1.4b (1.4x Book-to-Bill), and the management commentary on the deal pipeline was robust. Management remained confident of a return to growth path in 1QFY25 aided by deal ramp-ups and referred to 4QFY24 as a one-off quarter.

Outlook

The near-term slowdown in discretionary spending and its meaningful exposure to BFS would have an adverse impact on its growth performance. We expect a 7.9% CAGR in USD revenue over FY23-26. Margin recovery is expected to take time. Margins should improve meaningfully only once growth revives. We estimate a PAT CAGR of 9.8% over FY23-26. We value the stock at 25x FY26E EPS. The current valuation of 24x FY26E EPS limits any meaningful upside from the CMP. We reiterate our Neutral rating with a TP of INR 5,020.