Sharekhan's research report on LTIMindtree
For Q3FY23, LTIMindtree reported revenues of $1.05 billion, a growth of 16.3% y-o-y in CC terms, missing street estimates due to furloughs and fewer working days. EBIT margins came in at 13.9% as against 17.5% in Q2FY23. Margins were impacted due to furloughs, fewer working days , one-time merger-related integration costs, increase in employee and other operating expenses. In terms of verticals, manufacturing (17.5% of mix) led growth with 10.6% q-o-q growth while BFSI (37.4% of mix) and CPG & Retail (15.2% of the mix) grew 5.8% and 1.1%, respectively. The Hi-tech & Health verticals’ revenues declined 4.5% & 5.1% q-o-q, respectively while in terms of geographies, North America (72.3% of mix) reported muted growth of 1.6% q-o-q while Europe & RoW reported growth of 4.5% & 4.9%, respectively. LTM attrition declined by 180 bps q-o-q to 22.3%. In the quarter the company had a robust order inflow of $1.25 billion. The company also stated that it has a healthy pipeline ahead and continues to see large deals in the market. Management expects synergy benefits of US$1 bn and margin expansion of 200 to 300 bps over the next four to five years.
We expect the outlook for FY24 to be uncertain on account of global headwinds and any recovery is most likely to be gradual. Post-merger, LTIMindtree is well placed to provide cross-sell and up sell opportunities and reap significant revenue and cost synergies over the longer term .Hence, we maintain a Buy rating on LTIMindtree with revised PT of Rs. 4965 despite the muted results in a seasonally weak quarter.