LTIMindtree shares at Rs 4,035 or Rs 7,585? Check target prices post Q3 results

Shares of LTIMindtree Ltd fell sharply during the trading session on Thursday as the stock tumbled more than 13 per cent after the company reported a flop show in the December 2023 quarter results and concerning guidance by the company management.

However, despite a disappointment in quarterly earnings a host of brokerage firms continue to remain positive on the stock and see up to 40 per cent upside in the counter from Thursday's low. On the contrary, other analysts see more pain left in the counter and expect it to test sub-Rs 4,000 levels during the carnage.

LTIMindtree reported a 17 per cent rise on a year-on-year (YoY) basis in the consolidated net profit at Rs 1,169 crore, compared to Rs 1,000 crore in the year-ago period. Revenue also rose 4.6 per cent to Rs 9,017 crore. The company's revenue increased about 5 per cent YoY to Rs 9,016.6 crore against Rs 8,620 crore in the year-ago period.

Also read: LTIMindtree shares slump 13% after Q3 earnings; here's what analysts say

LTIMindtree reported inline financial performance for the quarter. Both, the revenue growth and EBIT margin were as per expectation. It reported constant currency growth led by Manufacturing vertical and BFSI vertical, said YES Securities. There was a sequential decline in EBIT margin led by the impact of increase in SG&A expenses.

The near-term demand environment remains challenging as the clients remain cautious regarding the evolving macroeconomic situation, resulting in slowdown in discretionary IT investments. This continues to impact near term revenue performance. We expect revenue growth to pick up from Q4FY24 led by robust deal booking and strong deal pipeline, it added with a 'buy' rating and a target price of Rs 7585 apiece, suggesting an upside of 40 per cent from its lows on Thursday.

Following the announcement of Q3 results, shares of LTIMindtree tanked more than 13.4 per cent to Rs 5436 during the trading session on Thursday, before making a partial recovery. The total market capitalization of the company dropped below Rs 1.65 lakh crore. The scrip had settled at Rs 6277.65 in the previous trading session Wednesday.

LTIMindtree highlighted near-term weakness on higher-than-expected furloughs. We trim FY24E/25E earnings estimates incorporating near-term muted growth and margin weakness, said Elara Capital which downgraded the stock to 'accumulate' from 'Buy' but slightly raised target price to Rs 6,570 on 27 times December-25E earnings.

"We stay moderately positive medium-term on a better portfolio mix, including Hitech/ Utilities, which may turn around, strong positioning in GenAI and upcoming synergy benefits," Elara added.

The management is very optimistic about long-term and broad-based growth across verticals, backed by resilient client engagement. However, near-term macroeconomic challenges may tamper growth momentum in the short term, said Axis Securities. The company’s TCV nonetheless stood strong in Q3FY24 at $1.5 billion across verticals and geographies, it said.

"The management is confident of gaining medium-term to long-term demand momentum on the backdrop of the deals it has won in the previous quarters. It expects weaker revenue growth in Q4FY24, indicating headwinds in the near term. Margin improvement will be difficult to achieve despite having negative hiring owing to higher operating expenses," it added with a 'hold' rating and a target price of Rs 6,400.

Operating margins expanded to 15.4 per cent YoY but fell short of its expectations of exiting the fiscal-year at 17-18 per cent. Margins contracted sequentially by 60 basis points (bps), which the management attributed largely to furloughs and fewer working days during the quarter.

LTIMindtree posted 3QFY24 results below estimates. The guidance for 4QFY24 was weaker than expected. LTIM has over-promised and underdelivered in FY24 as the initial guidance ignored the weakening macro conditions. It started the year with what seemed like an aggressive double digit growth guidance and then post 2QFY24 did away, said Nirmal Bang Institutional Equities.

"The demand commentary of LTIM has turned out to be more cautious than what we have heard from its peers. There was no talk of ‘green shoots’ that some of its peers were referring to during 3QFY24 calls.  We reiterate ‘sell’ on the stock with a lower target price of Rs 4,035 based on December 25E EPS," it said, adding that current valuations are excessive. 

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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