Buy LTIMindtree Ltd For Target Rs. 4, 960 - Yes Securities
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Result Synopsis
LTIMindtree (LTIM) reported mixed financial performance for the quarter. While, the revenue growth was below estimate, EBIT margin came above expectation. It reported constant currency growth of 0.7% QoQ, led by BFSI( up 2.6% QoQ) and Manufacturing and Resources( up 1.1% QoQ). On reported basis, revenue grew by 0.8% QoQ in INR terms (up 1.0% QoQ in USD terms). There was sequential improvement in EBIT margin(up 250 bpsQoQ) led by lower SG&A cost. Employee attrition continues to moderate as LTM attrition decreased by 210 bps QoQ to 20.2%.
The multiyear tech adoption cycle broadly remains intact led by adoption of cloud and data analytics. However, the clients remain cautious regarding the evolving macroeconomic situation and there are signs that customers want to slow their discretionary IT investments and it has led to more time in decision making and it poses near term risks. Employee attrition is expected to come down going ahead and should support operating margin. We estimate revenue CAGR of 15.0% over FY23?25E with average EBIT margin of 17.8%. We maintain our BUY rating on the stock with revised target price of Rs 5,364/share at 25.0x on FY25E EPS. The stock trades at PER of 25.5x/20.6x on FY24E/FY25E EPS
Result Highlights
* Reported revenue of Rs 86.9bn (up 0.8% QoQ in INR terms; up 1.0% QoQ in USD terms). The sequential growth was led by BFSI vertical (up 2.6% QoQ); Manufacturing and Resources (up 1.1% QoQ). Hitech, Media and Entertainment had weak quarter (down 1.5% QoQ). The cc growth was 0.7% QoQ.
* EBIT margin increased by 250 bps QoQ to 16.4%, led by decrease in SG&A Expenses.
* Reported healthy order inflow of $1.06bn for the quarter ($1.25 Bn in Q3FY23).
* Added 31 new clients compared to 28 new clients added in Q3FY23.
* Number of employees was down 1,916 QoQ to 84,546; LTM attrition was down 210 bps QoQ to 20.2%.
* Utilization (excluding trainees) was down 120 bps QoQ to 81.7%. Offshore effort mix was flat QoQ to 85.1%.
DSO decreased by 1 day QoQ to 60 days.
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