Asian Paints, LTIMindtree Q3 Results Review: HDFC Securities

HDFC Securities Institutional Research

Asian Paints - Broadly in-line performance; not much to cheer about

Asian Paint Ltd.'s revenue grew 5.4% in Q3 to Rs 91.0 billion (our estimate: Rs 91.9 billion). Decorative clocked 12/5.5% volume/value growth and industrial business grew ~11% YoY in Q3 FY24.

Luxury and economy products supported growth in the deco segment. Growth was balanced across rural and urban markets. Normalising input costs coupled with operational, formulation and sourcing efficiencies led to margin expansion.

Gross margin/Ebitdam expanded 504/393 basis points YoY respectively to 43.6/22.6% (our estimate: 43.6/21.4%).

We’ve cut our FY25/26 earning per share estimates by 0.9/4.4% to account for lower volume growth in FY25/26.

Maintain 'Reduce' with an unchanged discounted cash flow -based target price of Rs 3,150/share, implying 48 times March-26 price/earning.

LTIMindtree - Recovery pushed out

LTIMindtree Ltd.'s delivered a soft Q3, impacted by higher-than-usual furlough and weakness in discretionary projects, which is likely to extend into Q4. The bright spots that provide visibility for growth acceleration in FY25E are-

1. strong growth in deal bookings with 25% YoY (15% QoQ) in total contract value and

2. deal pipeline at $4.6 billion, up by 30% YoY including several vendor consolidation and multiple services cost optimization deals, in addition to lower days sales outstanding and improved free cash flow.

LTIMindtree growth deceleration in FY24E is emanating from the erstwhile Mindtree portfolio while the earning per share service line is relatively resilient, driven by greater thrust on cost optimization deals. Conversely, the recovery trajectory for the company can be sharper with a pick up in discretionary services.

We continue to expect LTIMindtree to provide a sustainable outperformance as compared to larger peers over the medium term (LTIMindtree - In the big league); however, risks pertaining to a large banking and financial services client and delayed recovery can act as deterrents.

Downgrade LTIMindtree to 'Add' ('Buy' earlier), valuing the company at 28 times FY26E earning per share.

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