 "LTIMindtree shares crash 6.5% after Q2 results; Should you buy, sell, hold?")
LTIMindtree share price: LTIMindtree share price declined 6.5 per cent to an intraday low of Rs 5,980 per share on the BSE on Friday. The drop in LTIMIndtree shares came after the information technology (IT) company's management gave a cautious commentary for growth in the October-December quarter (Q3) of the current financial year 2024-25 (FY25).
At 1:35 PM, LTIMindtree shares were trading near the day's low price as against a 0.38-per cent rise in the benchmark BSE Sensex index.
LTIMindtree Q2 results 2024
LTIMindtree, on Thursday, said that its net profit grew by 7.7 per cent year-on-year (Y-o-Y) to Rs 1,251.6 crore in the July-September quarter of FY25 (Q2 FY25). Sequentially, ir was up 10.3 per cent. Revenue, meanwhile, increased by 6 per cent Y-o-Y and 3.2 per cent Q-o-Q to Rs 9,432.9 crore for Q2 FY25.
The numbers, analysts said, were mostly in-line with Street estimates.
Segment-wise, Technology, Media, and Communication saw an increase of 12 per cent Y-o-Y and 1.9 per cent Q-o-Q. BFSI was up 2.3 per cent Y-o-Y and 4 per cent sequentially. Manufacturing and Resources was up 5.8 per cent Y-o-Y and 0.7 per cent Q-o-Q.
That apart, the company closed several multi-year deals in Q2, with an order intake of $1.3 billion (book-to-bill 1.2x). Large deal pipeline remains strong (over $5 billion), with several deals in the final stages. That Management said it would focus on Artificial Intelligence going ahead with the AI strategy being anchored on three core principles – AI in everything, everything for AI, and AI for everyone.
Why LTIMindtree shares are falling today?
During the Q2 FY25 earnings call, LTIMindtree management said it remains cautiously optimistic on outlook with seasonal weakness in Q3 likely to result in some moderation of momentum seen over the last couple of quarters.
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Wage hikes, it said, should also impact margins in Q3, while discretionary spending environment has not shown any material improvement. However, ramp up of previously won deals, healthy pipeline, and strong traction in key verticals may keep the company in good stead.
LTIMindtree shares fall: What should investors do?
Nomura | Reduce | Share price target: Rs 5,140
We lower our FY25-26F Ebit margin estimate by 50-80 basis points (bps) and now expect 14.9 per cent and 15.9 per cent Ebit margin in FY25 and FY26, respectively. We also lower FY25-27 EPS estimate by nearly 3-5 per cent, driven both by lower revenue growth and margin estimates. Our reduced share price target stands at Rs 5,140 (24x FY27F EPS).
Upside risks to our estimates, however, stem from strong large-size deal wins and higher-than-expected margin expansion.
BNP Paribas | Outperform | Share price target: Rs 6,300
LTIM is cautiously optimistic of H1FY25 growth momentum continuing into H2FY25, given the recently won deal ramp-up. We gain comfort as growth broadens across verticals and geographies, including the otherwise challenging manufacturing vertical. We see revenue growth as the key margin lever for LTIM. As demand recovers, we see LTIM offering superior earnings growth. We, however, trim our FY25-27E EPS by 0-1 per cent to bake in Q2FY25 results and management commentary.
Axis Securities | Hold | Share price target: Rs 6,720
From a long-term perspective, we believe LTIMindtree is well-positioned to drive and sustain growth, supported by its multiple long-term contracts with leading global brands. However, rising concerns over the prospects of large economies, coupled with ongoing supply-side constraints, may affect the company's short-term growth trajectory.
We recommend a 'Hold' rating on the stock as LTIMindtree benefits from a strong deal pipeline. We have upgraded its P/E multiple due to the recovery in automation spending. We assigne a 32x P/E multiple to its FY26E earnings of Rs 207/share, arriving at a target price of Rs 6,720 per share.
Emkay Global Financial Services | Reduce | Share price target: Rs 6,100
The margin journey to 17-18 per cent has been elongated due to the external environment. It is going to be difficult to move rapidly to the aspirational margin target unless double-digit growth returns. The current focus is on maintaining the margin and wait for growth to return. The management expects normal furlough this year compared to extended furlough faced last year. Current utilisation is 87.7 per cent but the comfortable range remains ~85 per cent. It added ~1,100 freshers in Q2.
We have tweaked FY25-27E EPS by 1 per cent factoring in the Q2 performance.
Motilal Oswal Financial Services | Buy | Share price target: Rs 7,400
Concern around margins is a key downside risk for the stock; Q2FY25 saw a modest margin expansion of 50bp over a muted Q1. H2FY25 will face margin headwinds such as wage hikes, large deal ramp ups, and hiring.
We believe LTIM has superior offerings in data engineering and ERP modernisation, positioning it well to capture pre-GenAI expenditures. We anticipate LTIMindtree to outperform its large-cap peers and
expect a low double-digit constant currency (CC) growth for FY26.
Our estimates are largely unchanged; FY25/FY26e EPS estimates are revised down by a minimal 1 per cent owing to margin pressures.