 "LTIMindtree")
Shares of LTIMindtree slipped 13 per cent to Rs 5,436 on the BSE in Thursday’s intra-day trade after the IT services firm reported a disappointing revenue growth of 0.7 per cent sequentially and 3.1 per cent YoY in constant currency (CC) terms in the December quarter (Q3FY24).
The growth was affected by higher-than-expected furloughs and a continued slowdown in discretionary spending.
The company posted a net profit of Rs 1,169 crore for Q3FY24, up 16.8 per cent YoY and 0.6 per cent sequentially, below the consensus Bloomberg estimates of Rs 1,230 crore.
Profitability was impacted by higher furloughs and pass-through revenues, despite lower workforce (-1,100).
LTIMindtree’s earnings before interest and taxes (EBIT) margin contracted to 15.4 per cent from 16 per cent in the preceding quarter due to the impact of furloughs and a lower number of working days.
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Motilal Oswal Financial Services (MOFSL) estimated revenue growth of 1.2 per cent quarter on quarter (QoQ) CC, while EBIT margin missed its estimate by 40 basis points.
However, LTIMindtree said the company booked its highest-ever order inflow at $1.5 billion, representing a 21 per cent increase YoY and management commentary on the deal pipeline was robust.
While the impact of furloughs in Q3 was higher and more widespread, strong deal wins (highest ever) indicate divergence between near-term growth and medium-term growth.
While this commentary is in line with its large-cap peers, LTIMindtree still has to demonstrate growth benefits from the expansion of teams across its strong verticals.
The near-term slowdown in discretionary spending and its meaningful exposure to BFSI would have an adverse impact on its growth performance, as per analysts.
MOFSL expects the company to grow at a sub-10 per cent rate YoY in FY25, resulting in a 9.7 per cent CAGR over FY23-26E. The brokerage has a ‘neutral’ rating on the stock.
