LTIMindtree shares: More pain ahead for IT firm post weak Q4 results? Here are stock price targets

LTIMindtree, whose shares are down 25 per cent in 2024 so far, has seen 4-9 per cent cuts in earnings estimates following another quarter of weak results. While the management indicated a return to growth path from June quarter, price targets by a few analysts  suggest flat to negative returns ahead for the stock. The LTIMindtree stock is adequately factoring in most positive, they said.

LTIMindtree reported a 1.3 per cent sequential decline in constant currency (CC) revenue in the March quarter against Motilal's estimate of 1.4 per cent QoQ CC growth. The growth was hit by two project cancellations in BFSI as clients reprioritised their spending.

Deal wins though were strong at $1.4 billion (1.4 times Book-to-Bill), and the management commentary on the deal pipeline was robust.  Though Q1FY25 should see some margin uptick on account of reversal of one-time impact from project cancellations and operating leverage partly offset by higher visa costs, there is no meaningful upside to margin for FY25 unless growth picks up meaningfully, Motilal Oswal said.

“We now expect LTIM to deliver a 15.9 per cent EBIT margin in FY25 before moving to 16.8 per cent in FY26. We have reduced our FY25/26 earnings estimates by 6/9 per cent after cuts in revenue and profitability. LTIM is currently trading at 24 times FY26E EPS, which adequately captures the growth opportunities ahead. Our TP of Rs 5,020 implies 25x FY26E EPS. We reiterate our Neutral rating on the stock," Motilal Oswal said.

In the near term, priority remains on growth and hence, margin revival will be delayed further, Nomura India said. It cited December quarter management commentary, where LTIMindtree hinted at a “delay of a few quarters to reach its 17-18 per cent EBIT margin aspiration”.

"We lower our Street-low FY25F-26F EPS estimates further by 4-8 per cent to factor in lower growth and margins. Our FY25F-26F EPS estimates are 9-12 per cent lower than consensus. We lower our target price by 8 per cent to Rs 4,170, implying 12 per cent downside. The stock is currently trading at 29 times FY25F and 25 times FY26F EPS. We retain our Reduce rating on the stock," it said.

Nirmal Bang noted that there has been several top management exits post the execution of the merger between LTI and Mindtree. It believes that such exits impacted TCV accretion and revenue growth for the company in FY24 and will probably do so in the near term too.

"Post 4QFY24, we have pared EPS estimates for FY25-FY27 by 8 per cent due to both revenue and margin cuts. We reiterate ‘SELL’ on LTIM with a lower target price (TP) of Rs 4,015 based on Mar ‘26E EPS. We have raised the discount to the target PE multiple of TCS to 15 per cent from 10 per cent and now use a target PE multiple of 20.1 times, due to weaker than expected execution through FY24. While medium term prospects of faster than Tier-1 earnings growth and very high ROICs remain, current valuations are excessive," it said.