Neutral LTIMindtree; target of Rs 5350: Motilal Oswal

Neutral

Motilal Oswal's research report on LTIMindtree

LTIM posted a revenue growth of 1.7% QoQ/4.4% YoY CC in 2QFY24 vs. our estimate of 1.4% QoQ CC. Deal wins were modest at USD1.3b (up 20% YoY). Despite wage hikes, the EBIT margin stood at 16.0%, surpassing our estimates by 30bp. Despite the persistent weakness in the macro environment and cautious client sentiment, the management expressed confidence in strong growth in 2HFY24. This optimism is fueled by the ramp-ups in deals secured in 1HFY24, despite higher than usual furloughs in 3QFY24. Additionally, the company benefits from a strong pipeline of upcoming opportunities. The management also suggested that deal signing activity is showing good momentum in 3QFY24. The management commentary mirrored that of its peers, acknowledging the challenging macro environment, cuts in discretionary spending and strong deal wins aided by shift in new wins towards costoptimization initiatives. The management expects growth to be broad based in 2HFY24.

Outlook

We have tweaked our FY24/25 estimates by ~2% to account for better margins. LTIM is currently trading at 25x FY25 EPS, which adequately captures the growth opportunities ahead. Our TP of INR5,350 implies 26x FY25E EPS. We reiterate our Neutral rating on the stock.

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LTIMindtree - 19 - 10-2023 - moti