LTIMindtree share price jumps 6% post Q2 results; brokerages express mixed views; here's what they say

LTIMindtree share price rose 5.88 per cent to close at ₹5,460 on BSE on Thursday, October 19, a day after the company reported its September quarter scorecard. 

LTIMindtree share price has gained about 16 per cent in the last one year against an about 11 per cent gain in the equity benchmark Sensex. The stock hit its 52-week high of ₹5,590 on September 14 this year and a 52-week low of ₹4,120 on January 23 this year, on the BSE.

LTIMindtree Q2 results

LTIMindtree reported a consolidated net profit of 1161.8 crore for the second quarter ending September 30, marking a sequential increase of 0.9 per cent.

The IT company's revenue for the second quarter of the current financial year stood at ₹8,905.4 crore, as against ₹8,702.1 crore for the corresponding period a year ago. The company saw its operating margin drop below its guidance of 17-18 per cent for FY24.

LTIMindtree reported an operating margin of 16 per cent, down 70 basis points (bps) sequentially. However, the company management said in its post-earnings press conference that it remains confident of achieving the guided margin, and has not revised its target for FY24.

Also Read: LTIMindtree margin drops below FY24 guidance in Q2

Besides, the company announced an interim dividend of ₹20 per equity share of face value of ₹1 each. The record date for the same has been fixed on October 27, 2023, according to a stock exchange filing.

Also Read: LTIMindtree Q2 result: L&T unit announces interim dividend of Rs. 20 share, net profit rises to ₹8,905.4 crore

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Brokerages express mixed views

Top brokerage firms have diverse views on LTIMindtree stock after the IT company's Q2FY24 earnings. Have a look:

YES Securities

Brokerage firm YES Securities has a buy call on LTIMindtree with a revised target price of ₹6,360 from ₹6,190 earlier.

The brokerage firm said that the near-term demand environment remains challenging as the clients remain cautious regarding the evolving macroeconomic situation and are taking more time for decision-making, thus resulting in a slowdown in discretionary IT investments. This continues to impact near-term revenue performance.

YES Securities expects revenue growth to pick up from the second half of FY24 led by robust deal booking and strong deal pipeline. Employee attrition is expected to come down going ahead and should support operating margin.

"We estimate revenue CAGR of 12.6 per cent over FY23‐25E with an average EBIT margin of 17.7 per cent. We maintain our buy rating on the stock with a revised target price of ₹6,360 at 30 times FY25E EPS (earnings per share). The stock trades at a PER (price-earnings ratio) of 30.9 times and 24.4 times on FY24E and FY25E EPS respectively, YES Securities said.

Choice Equity Broking

Choice maintained an 'add' call on the stock with a target price of ₹5,845.

The broking firm said amidst escalating macro uncertainties leading to cautious client spending, the company continues to strengthen its position as a partner of choice for their clients.

The brokerage firm pointed out that although the management anticipates above-average furloughs in Q3, they are confident that their robust order inflow and healthy deal pipeline will help them deliver a stronger second half, setting a promising stage for FY25E.

"We have introduced FY26E and expect revenue, EBIT and PAT to grow at a CAGR of 11.2 per cent, 15.7 per cent and 14.7 per cent, respectively, over FY23-FY26E. We maintain our add rating and arrive at a revised target price of ₹5,845 implying a PE of 26 times (changed) on FY26E EPS of ₹225," said Choice.

Kotak Institutional Equities

Kotak has a 'reduce' call on the stock with a target price of ₹5,350.

Kotak pointed out that LTIMindtree's management guided for a stronger second half based on the ramp-up of deals won in the first half, despite headwinds from higher furloughs and weak discretionary spending.

However, the downside is that the company is a prisoner of high expectations, Kotak said.

The brokerage firm cut FY2024-26E revenues and EPS by about 1-2 per cent and ~2-3 per cent, respectively.

"The LTIMindtree stock has underperformed peers and trades at more realistic, albeit full valuations," said Kotak.

Motilal Oswal Financial Services

Motilal Oswal has a 'neutral' view on the stock with a target price of ₹5,350.

The brokerage firm has tweaked its FY24/25 estimates by about 2 per cent to account for better margins.

"LTIMindtree is currently trading at 25 times FY25 EPS, which adequately captures the growth opportunities ahead. Our target price of ₹5,350 implies 26 times FY25E EPS," said Motilal Oswal.

Nirmal Bang

Nirmal Bang has a 'sell' call on the stock with a target price of ₹4,366 as the brokerage firm believes that the worst on the US macro front is ahead of us and not behind, and hence we are cautious on the IT sector and LTIMindtree.

"It is this view which has forced us to pare our FY25 revenue/earnings to below consensus levels. We believe we are in a ‘slower for longer’ regime and that client uncertainty has only increased as 2023 has rolled on," said Nirmal Bang.

"We reiterate ‘sell’ on LTIMindtree with a slightly lower target price of ₹4,360 based on Sept 2025E EPS while keeping multiple at 20 times, the same as that accorded to TCS, our valuation benchmark. While medium-term prospects of faster than tier-1 earnings growth and very high ROICs (return on invested capital) remain, current valuations are excessive," Nirmal Bang said.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.