Weak demand in BFSI and hi-tech verticals is expected to limit LTIMindtree’s revenue growth to low single digits quarter-on-quarter (QoQ) in the October-December quarter. However, a strong growth from manufacturing and utility verticals will offset some pressure, taking the overall revenue growth for the IT major to 1.6 percent, said analysts.
LTIMindtree is scheduled to announce December quarter results on January 17. According to an average estimate of five brokerages, LTI Mindtree's revenue is projected at Rs 9,050 crore in Q3FY24 as compared to Rs 8,905 crore in Q2FY24.
The company's Q3 net profit too is estimated to grow by a modest 1.6 percent on-quarter to Rs 1,181 crore in Q3FY24 as against Rs 1,162 crore in Q2FY24. The profit growth would likely be impacted by high furloughs -- which has hit other IT majors as well during the quarter.
High furloughs to keep LTIMindtree's margins under pressure in Q3
At a time when the IT sector is grappling with higher furloughs, LTIMindtree's earnings before interest and tax (EBIT) margin is also expected to see an impact, particularly in the hi-tech and BFSI verticals. The company's EBIT margin is expected to be flat at 16 percent in Q3FY24 due to one-time costs included in the base quarter, predicted analysts.
On the deal pipeline front, analysts at Kotak Institutional Equities expect a muted deal total contract value (TCV) of $1.25 billion, flat on an yearly basis.
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LTIMindtree's results follow better-than-expected performance by IT companies so far. The Q3 results of Infosys, TCS, HCL Tech, Wipro was expected to come on a muted note due to seasonality and weak macros, but investors have cheered the outcomes as these largecap IT companies have beaten the low forecasts in a tough quarter. All the four IT companies topped what the Street was anticipating – with HCL Tech’s Q3 results leading the pack, followed by TCS, Infosys, and Wipro.
Going ahead, the tough macro-environment could spell some good news for IT pack as interest rate cuts could recover demand and improve deal pipeline.
Some of the important factors for investors to watch out in LTIMindtree post Q3 results are: performance of BFSI, hi-tech, and retail verticals, impact of macro-headwinds on demand, impact of wage hikes on margin guidance for FY24, FY25 revenue outlook, performance of top accounts, commentary on client budgets, investments in GenAI partnerships and solutions, recent deal wins and deal pipeline, and updates on merger synergies.
LTIMindtree's stock performance
In the October-December period, the stock of LTIMindtree surged over 20 percent, outperforming Nifty IT index, which remained flat. On a yearly basis, Wipro shares soared over 45 percent as against 25 percent jump in the Nifty IT index.
Currently, LTIMindtree shares trade at 41 times (x) price-to-earnings (PE) ratio, higher than sector's mean of 31x PE multiple, suggested data.
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