Buy LTIMindtree; target of Rs 7585: YES Securities

YES Securities research report on LTIMindtree

LTIMindtree (LTIM) reported inline financial performance for the quarter. Both, the revenue growth and EBIT margin were as per expectation. It reported constant currency growth of 0.7% QoQ, led by Manufacturing vertical (up 20.1% YoY); BFSI vertical (down 1.4% YoY). On reported basis, revenue grew by 1.2% QoQ in INR terms (up 0.8% QoQ in USD terms). There was sequential decline in EBIT margin (down 61 bps QoQ) led by impact of increase in SG&A expenses. Employee attrition continues to moderate as LTM attrition decreased by 100 bps QoQ to 14.2%. The near term demand environment remains challenging as the clients remain cautious regarding the evolving macroeconomic situation and are taking more time for decision making, thus resulting in slowdown in discretionary IT investments. This continues to impact near term revenue performance. We expect revenue growth to pick up from Q4FY24 led by robust deal booking and strong deal pipeline. Employee attrition is expected to come down going ahead and should support operating margin.

Outlook

We estimate revenue CAGR of 16.4% over FY23‐26E with average EBIT margin of 17.4%. We maintain our BUY rating on the stock with revised target price of Rs 7,585/share at 31.0x on FY26E EPS. The stock trades at PER of 29.6x/25.7x on FY25E/FY256 EPS.