LTIMindtree rises 3.5% as Street cheers steady Q1 results, positive commentary

The EBIT margin or operating margin increased sequentially to 15 percent from 14.7 percent last quarter, in line with Moneycontrol's estimates of 15 percent. In the same quarter last fiscal, operating margins stood at 16.7 percent.

“While the environment remains unchanged, FY25 started on a positive note for us. Our Q1FY25 EBIT expanded to 15 percent and order inflow remained stable at $1.4 billion. Our top 3 industry verticals and our largest geography have performed well sequentially," said Debashis Chatterjee, chief executive officer and managing director, LTIMindtree.

Chatterjee attributed the improved performance to a measured uptick in IT spending for critical initiatives with clients balancing innovation and fiscal prudence.

Brokerage firm Motilal Oswal Financial Services is especially impressed by LTIMindtree's encouraging commentary, particularly among IT companies that have reported their earnings so far. Nuvama Institutional Equities also saw the commentary in a positive light, stating that it alluded to green shoots and ramp-up of deals—anticipating growth momentum to continue in Q2 FY25.

Buoyed by the company's improving growth prospects, MOFSL also upgraded LTIMindtree to a 'buy' rating with a price target of Rs 7,000. The brokerage cited LTIMindtree's superior offerings in data engineering and ERP modernisation, which position it well to capture pre-GenAI expenditures, as the key drivers behind the upgrade.

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MOFSL also anticipates LTIMindtree to outperform its large-cap peers and expects low double-digit constant currency growth for FY26. Nuvama Institutional Equities also expects more pieces to fall into place for the IT firm (growth in Hitech, revival in BFSI, employee pyramid
rationalisation) over the next two quarters, as it anticipates solid growth with gradual margin expansion. Based on these expectations, Nuvama also raised its price target for the stock marginally to Rs 7,000.

Following the trend, Kotak Institutional Equities also took cognizance of LTIMindtree's improved execution despite persisting challenges in the industry. On that account, the brokerage also slightly raised its price target for the stock to Rs 5,000 but retained its 'reduce' rating. KIE's cautious rating on the stock is because the firm believes LTIMindtree needs to
demonstrate a more consistent healthy growth trajectory and deliver on its
synergy promises to justify higher multiples.

In addition to that, MOFSL also highlighted that margins for LTIMindtree still remain a concern and the biggest risk to their outlook. A re-rating will depend on significant margin recovery, primarily driven by volume recovery, the firm wrote in a note.

Nomura also believes along the same lines as it sees the unlikelihood of a margin recovery for the IT major in FY25. "LTIMindtree had earlier indicated that it aims to have a flattish EBIT margin on year in FY25, which we think may be challenging to achieve given salary hikes (due in Q3 for FY25) and hiring (both freshers and laterals given high utilisation of 88 percent)," Nomura stated.

Consequently, the brokerage chose to keep its 'reduce' call on the stock with a price target of Rs 4,670.

Also Read | LTIMindtree Q1 results: Net profit falls 1.5% YoY to Rs 1,135 crore, revenue up 5%

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