Jefferies retains ‘underperform’ rating on LTIMindtree, cuts EPS estimates by 1%

Weak management commentary along with continued decline in headcount does not inspire confidence in recovery in 2HFY24, wrote analysts.

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26 Aug, 2025 12:21

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With high exposure to business verticals and geographies facing high uncertainty, and operating margins missing analyst estimates, LTI Mindtree has retained its ‘underperform’ rating with Jefferies. The brokerage has cut its earnings estimates for FY24 by 1 percent.

“LTIM's high exposure to North America (70 percent of revenues) and BFSI and HiTech (60 percent of revenues) adds risks to its growth. Weak management commentary along with continued decline in headcount does not inspire confidence in recovery in 2HFY24. This along with rich valuations of 28x 1-yr forward compel us to keep our UNPF stance with revised PT of Rs 4,500 at 22x PE,” they wrote. They expect the earnings CAGR of 15 percent over FY23-25.

Also read: LTIMindtree Q1 Results: Net profit up 4% at Rs 1,152 crore, revenue jumps 14%

Analysts wrote that the company’s revenues of $1,059 million, which was flat quarter-on-quarter (QoQ), were largely in line with their estimates. But the operating margin of 16.7 percent and profit Rs 11.5 billion missed their estimates. While gross margins were up 50bps, thanks to a 70 bps increase from operating efficiency (+70bps), it was hit by visa costs (-20bps). Higher marketing costs also impacted margins by 20bps, they added. Analysts have tweaked their FY24/25 margin estimates slightly and expect margins of 16.5/17% in FY24/25; they have retained their revenue estimates for FY24/25 and expect it to grow 7.7 percent YoY in FY24.

Analysts noted that growth in the hi-tech vertical at 3.2 percent QoQ recovered, segments such as BFSI and retail saw 1.3 percent QoQ decline. They added that traction in life science and healthcare vertical (+4.1% QoQ) continued, but manufacturing vertical (-1.1% QoQ) witnessed a decline due to the pass-through component.

Also read: Buy LTIMindtree; target of Rs 5820: HDFC Securities

Region-wise, while revenues from North America increased, that from ROW (rest of the world) region saw a “meaningful decline”. They added that the company’s growth was limited to its top five clients with all other client cohorts witnessing revenue decline.