LTIMindtree Q4 Results Review - Weak Quarter; Near-Term Outlook Remains Bleak: Motilal Oswal

Motilal Oswal Report

LTIMindtree Ltd.'s revenue declined 1.3% QoQ constant currency in Q4 FY24 versus our estimate of 1.4% QoQ CC growth. The growth was hit by two project cancellations in banking, financial services and insurance as clients reprioritized their spending. However, deal wins were strong at $1.4 billion (1.4 times book-to-bill), and the management commentary on the deal pipeline was robust. Management remained confident of a return to growth path in Q1 FY25 aided by deal ramp-ups and referred to Q4 FY24 as a one-off quarter.

LTIMindtree’s Q4 FY24 Ebit margin contracted 70 bp QoQ to 14.7%, missing our estimate by 110 bp. Profitability was hit by 80 bp due to project cancellations in BFSI (expected to be reversed in Q1 FY25). Attrition remained stable at 14.4%, while utilisation declined to 86.9%. Management indicated that utilisation should further go down by 50-100 bp in FY25, so that it falls within the comfort band of 85-86%. The target margin band of 17-18% would only be achieved once growth returns.

While the management indicated a return to growth path from Q1 FY25, and its commentary is in line with its large-cap peers, LTIMindtree still has to demonstrate growth benefits from the expansion of teams across its strong verticals.

We expect the company to grow at 6.1% YoY in FY25 in USD terms, resulting in a 9.7% USD revenue CAGR over FY24-26E.

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