LTIMindtree stock rises 3%, hits 6-month high on steady Q1 earnings

MOFSL upgraded LTIMindtree to BUY with a target price of Rs 7,000 due to its superior offerings in data engineering and ERP modernization, positioning it well to capture the pre-GenAI expenditures.

Shares of LTIMindtree hit a six-month high at Rs 5,753.90, gaining 3 per cent on the BSE in Thursday’s intra-day deal after the company reported a net profit of Rs 1,135 crore for the first quarter of the current financial year (Q1FY25), down 1.5 per cent year-on-year (YoY). On a sequential basis, the profit grew by 3.1 per cent.

Revenue for the June quarter increased 5 per cent YoY at Rs 9,142.6 crore. On a sequential basis, the firm’s revenue grew 2.8 per cent.

Earnings before interest and tax (EBIT) margin increased by ~30 bps QoQ due to the tailwinds from absence of -80 bps impact of cancellation of 2 projects project cancellations from the last quarter & operational efficiencies which were partially offset by headwinds from higher visa costs (50 bps) and higher SG&A expenses on account of travel & marketing events.

 

The company during the quarter won total contract value (TCV) of $1.4 billion, flat QoQ. The company’s net employees during the quarter increased by 284 to 81,934 while attrition was flat QoQ at 14.4 per cent.

The company’s top 3 industry verticals and its largest geography have performed well sequentially. This is attributed to a measured uptick in IT spending for critical initiatives with clients balancing innovation and fiscal prudence, the management said.

At 10:10 am; LTIMindtree was trading 2.6 per cent higher at Rs 5,705, as compared to 0.22 per cent rise in the BSE Sensex. The stock was trading at its highest level since January 18, 2024. It had hit a 52-week high of Rs 6,442.65 on January 15, 2024.

LTIMindtree had a decent performance in Q1FY25 with uptick in both revenue & margins as deals which were closed/paused in prior periods finally ramped up in this quarter. The management highlighted that there was no change in the demand environment as clients continue to focus on cost takeout and vendor consolidation deals. However, there is momentum gain in high priority transformational projects, especially in the BFSI segment (without discretionary spend uptick) as well as in AI deals wherein clients are looking to scaling up from POCs, ICICI Securities said in a note.

The company indicated that it is planning to roll out wage hikes in H2FY25 which would impact the margins a little. The company’s deal wins remain flat, but a lot of MSAs are signed and many deals remain on the cusp of being closed in Q2, providing some revenue visibility for and beyond Q2. The management reiterated that medium term aspiration of margin expansion to 17-18 per cent is pushed forward and shall be achieved once revenue growth kicks in, the brokerage firm said in a note.

Analysts at Motilal Oswal Financial Services (MOFSL) upgraded LTIMindtree to BUY with a target price of Rs 7,000 per share due to its superior offerings in data engineering and ERP modernization, positioning it well to capture the pre-GenAI expenditures. Further, clients are finally resuming the "high-priority transformation" projects, in these areas.

The brokerage firm anticipates LTIMindtree to outperform its large-cap peers and expect low double-digit CC growth for FY26. Margins remain a concern, however, and the biggest risk to our thesis. A re-rating still depends on significant margin recovery, driven primarily by volume recovery, it added.