LTIMindtree Q3 Review - Near-Term Challenges Persist; Tepid Results: Axis Securities

Axis Securities Report

In Q3 FY24, LTIMindtree Ltd. reported revenue of Rs 9,017 crore, up 1.2% QoQ (0.7% QoQ in constant currency terms). This was slightly below our expectations.

The company’s operating profit stood at Rs 1,386 crore, reporting a decline of 2.6% on a QoQ basis. This was largely on account of lower overall demand in the majority of its operating regions. Its net profit for Q3 FY24 stood at Rs 1,169 crore, registering a growth of 0.6% QoQ.

Outlook

From a long-term perspective, we believe LTIMindtree is well-placed to deliver encouraging growth, given its multiple long-term contracts with the world’s leading brands.

Richer revenue visibility gives us confidence in its business growth moving forward. However, rising concerns over the prospects of large economies along with prevailing supply-side constraints pose uncertainties over the company’s short-term growth rates.

Valuation and recommendation

We recommend a 'Hold' rating on the stock and assign a 30 times price/earning multiple to its FY26E earnings of Rs 215.8/share to arrive at a target price of Rs 6,400/share, implying an upside of 2% from the current market price.

Key risks to our estimates and target price

• The demand environment is uncertain because of the potential threat of the recession from the world’s largest economies.

• The rising subcontracting cost and cross-currency headwinds may impact the company’s operating margins negatively.

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