LTIMindtree Q3 Review: Most Analysts Maintain 'Buy' On Strong Sales, Client Mining Opportunities
Most analysts maintain 'buy' rating on the stock, citing strong sales and client mining opportunities following the merger.
Despite the correction after the merger, analysts do not see the need to upgrade LTI Mindtree Ltd. ratings, even as the company reported a decline in third-quarter profit.
However, Most analysts maintain 'buy' rating on the stock, citing strong sales and client mining opportunities following the merger.
"Following the correction after the merger completion announcement and is getting into an interesting zone, though the correction is not enough to warrant an upgrade," Kotak said in its Jan. 23 note.
LTIMindtree Q3 FY23 (Consolidated, QoQ)
Revenues up 4.77% at Rs 8,620 crore vs Rs 8,227.8 crore (Bloomberg estimate: Rs 5956.35 crore)
EBIT down 16.88% at Rs 1,196.70 crore vs Rs 1,439.70 crore (Bloomberg estimate: Rs 970.56 crore)
EBIT margin at 13.88% vs17.5% (Bloomberg estimate: 16.29%)
Net profit down 15.82% at Rs 1,000.50 crore vs Rs 1,188.50 crore (Bloomberg estimate: Rs 969.11 crore)
Shares of the company traded flat while the benchmark Nifty 50 gained 0.47%. The total traded volume was 3.7 times its 30-day average volume.
Of the 39 analysts tracking the stock,21 maintained a 'buy', 8 analysts recommended a 'hold', while the remaining 10 suggested 'sell', according to Bloomberg data.
Here's what analysts make of the quarterly results:
IDBI Capital:
Upgraded the stock rating from 'hold' to 'buy' with a revised target price of Rs 5,000 and a return potential of 17%.
The company is seeing healthy traction in BFSI, energy and utility, travel and public led by large deal wins.
Expect the company’s revenue to increase at a compound annual growth rate of 15% over FY22-FY25E.
Significant synergy benefits led by cros-sell, up-sell, diversification of portfolio, inorganic growth, end to end services, client mining and larger deals is expected.
Aims to add $1 billion over next five years led by synergy benefits.
ICICI Securities
Maintained 'buy' rating on the stock with a target price of Rs 4,940 and a return potential of 16%.
Expects to see margin expansion of 200 to 300 basis points over the next four to five years.
The company is hopeful of recovery from real estate weakness in the medium term.
Tech spending in the areas of cloud, data and cybersecurity are resilient.
To capitalise on the strength of engineering expertise of LTI and customer experience expertise of Mindtree to capture market opportunities.
Kotak Mahindra Securities
Retained 'reduce' with an unchanged fair value of Rs 4,600.
LTIMindtree has sizeable contribution from hi-tech vertical, making it vulnerable but can recover.
Margins should retain some impact from merger-related costs and furloughs in 4QFY23 but recover in 3-4 quarters.
Well-positioned to address all aspects of demand - discretionary spending, cost take-outs and legacy modernization.
The revenue synergies are expected to be front-loaded, while cost synergies will be back-ended.
HDFC Securities
Maintained 'buy' rating on the stock with a target price of Rs 4,920.
Strong cross-sell and up-sell opportunity supported by vertical and service-line synergies with limited client overlap.
Increase in deal pipeline and a greater proportion of large deals supported by strong client mining credentials.
Opportunities of transition from mid-tier IT to tier-1 are greater than the risks of this transition.
Expects one billion U.S. dollars in revenue synergies over 4-5 years.
Dolat Capital
Assigned a 'reduce' rating with a target price of Rs 4350, implying an upside of 2%.
Reported an order inflow of $1.25 billion as clients focus on multi-year transformation deals.
Expected to get back to industry leading growth and profitability by FY24 by focusing on large deal wins.
Hi-tech is seeing higher furloughs as margins declined
Remain watchful of potential growth moderation owing to worsening of macro situation.