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PL Capital Report
PL Capital has maintained its ‘Hold' rating on LTIMindtree Ltd., with an unchanged target price of Rs 4,560, following insights from the company's recent analyst meet.
The brokerage highlighted LTIMindtree's long-term strategy centred on AI-led transformation, with management targeting doubling of USD revenue by FY31, implying a ~15% CAGR, along with ~200 basis points margin expansion.
In its Analyst Day, the company outlined a five-year strategic roadmap centred on AI-led business transformation, with management targeting a doubling of USD revenue by FY31 (implying ~15% USD revenue CAGR) and a 200 bps Ebit margins expansion.
The strategy is anchored on three pillars; Invest for Growth, Pivot and Excellence.
Growth is expected to be driven by capturing addressable revenue (Platform-oriented and Business-AI-led services), reimagined horizontal service lines, and scaling newer geographies. Additionally, M&A would be contributing 15-17% of incremental revenue over the next five years, that translates to ~13% organic CAGR (FY26-FY31).
The Pivot strategy focuses on Domain and Technology convergence that creates additional TAM for “Business AI and AI-led Digital Engineering solutions” ($0.8T) while leveraging partnerships across native-AI and LLM providers ecosystems to capitalize on an expanded industry TAM of ~$2.3T (including leakage of $0.3T from traditional bucket).
Excellence pillar aims to drive AI-led productivity, outcome-based delivery models, and cost optimisation to support the targeted margin expansion (+200bps over the next 5 years).
Considering the leakage in the traditional bucket, weakness in the marquee accounts and maturing AI-led services, PL Capital believes LTMindtree is at the inflection point, wherein the near-term revenue growth appears to be challenging before it achieves the aspirational growth rate.
Additionally, the integration of onsite-heavy Randstad's would weigh on the near-term consolidated margins, given its low-margin profile and revenue growth weakness.
The brokerage maintains its FY27E/FY28E estimates and reiterate Hold rating with an unchanged target price of Rs 4,560, based on 20x FY28E earnings per share.
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