LTIMindtree Q2 earnings: Shares slip 6%, price targets and a key risk for the stock 

Shares of LTIMindtree, the software and consulting major, slipped over 6% in early deals today after the firm announced its Q2 earnings. LTIMindtree stock fell 6.20% to Rs 6,004 against the previous close of Rs 6401.50 on BSE. Market cap of the IT firm declined to Rs 1.79 lakh crore. LTIMindtree reported a  10.3 percent sequential growth in Q2 profit to Rs 1,251.6 crore. Revenue climbed 3.2 percent quarter-on-quarter to Rs 9,432.9 crore. The Q2 earnings show was boosted by broad-based growth across all verticals and regions, along with strong deal momentum. 

The board of the IT firm approved an interim dividend of Rs 20 per share.

"Q2 was a good quarter marked by broad-based sequential growth experienced across all our verticals and geographies, helping us register a dollar growth of 2.8 percent," said CEO Debashis Chatterjee.

"LTIMindtree closed several multi-year deals, including one worth over $200 million. " Continued deal momentum in key verticals and significant Q2 hiring, including freshers, positions us well as we enter into the latter half of the fiscal year," said Chatterjee.

EBIT margin (Earnings Before Interest and Tax) in Q2 rose marginally to 15.5 percent from 15 percent in the preceding quarter. Free cash flow in the last quarter stood at Rs 681.9 crore during July-September compared to Rs 1,005.3 crore in the preceding quarter.

Motilal Oswal is bullish on the stock with a target price of Rs 7,400, a 16% upside to the previous close. 

"LTIMindtree logged a revenue growth of 2.3% QoQ/ 4.4% YoY in constant currency (CC) terms vs. our estimate of 3.0% QoQ in CC. In USD terms, revenue came in at USD 1.1 billion (up 2.8% QoQ/4.8% YoY), which was slightly below our estimate," said the brokerage. 

However, margins remain a concern, which pose a downside risk for the stock. 

"Concern around margins is a key downside risk for the stock; 2QFY25 saw a modest margin expansion of 50bp over a muted 1Q. 2HFY25 will face margin headwinds such as wage hikes, large deal ramp ups, and hiring. The management is at least 200bp above its comfortable utilization range, and while 2Q (net headcount growth of 3%) was a step in the right direction, we expect hiring to put pressure on margins going forward," said Motilal Oswal. 

Choice Broking has a reduce call on the stock with a price target of Rs 6,642, an upside of 3.7%. 

"The sustained deal momentum in key verticals, along with significant Q2 hiring including freshers strategically positions the company for success in the latter half of the fiscal year. The robust data practice, coupled with the innovative LTIMindtree AI platform, positions it as a major disruptor in the industry. We have introduced FY27E and expect Revenue/EBIT/PAT to grow at a CAGR of 9.2%/11.3%/12.0% respectively over FY24-FY27E. We maintain our REDUCE rating to arrive at a revised target price of Rs 6,642 implying a PE of 32.5x (modified) on Sep- FY27E EPS of Rs 204," said Choice Broking 

Brokerage Nuvama has a price target of Rs 7,550 for the IT stock. 

"LTIMindtree delivered strong results with two of its largest segments (BFSI and Hi-tech) reporting strong growth in two consecutive quarters. Deal-wins were stable with a robust deal pipeline, with large part comprising cost takeout deals. We are cutting FY25E/26E EPS by -3.8%/-3.7% on slightly lower margin trajectory. We continue to value LTIM at 33 times Sep-26E PE; retain ‘BUY’ with a target of Rs 7,550 (unchanged)," said Nuvama.

Shaji Nair, Research Analyst at Sharekhan by BNP Paribas is bullish on the stock after Q2 earnings. 

"LTIM reported revenue growth, up 2.3% in constant currency missing our estimate of 2.6% growth while EBIT margin expanded by 50 bps q-o-q to 15.5%, which is in line with expectations. The company reported several multi-year deal closures, including a USD 200 million plus deal. Net headcount additions improved significantly by 2504 while LTM attrition inched slightly higher. LTIM has delivered a second consecutive quarter of decent growth after several muted quarters.  After a decent H1FY25, traction and continued deal momentum in key verticals with significant Q2 hiring, including freshers, positions them well for H2FY25. We have a buy rating on the stock," she said 

LTIMindtree is a global technology consulting and digital solutions company that enables enterprises across industries to reimagine business models, accelerate innovation, and maximize growth by harnessing digital technologies.