Buy LTIMindtree Ltd For Target Rs. 6,190 - Yes Securities
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Result Synopsis
LTIMindtree (LTIM) reported mixed financial performance for the quarter. While, the revenue growth was slightly below estimate, EBIT margin came above expectation. It reported constant currency growth of 0.1% QoQ, led by BFSI vertical (up 12.1% YoY); Manufacturing and Resources (up 14.9% YoY). On reported basis, revenue grew by 0.1% QoQ in INR terms (up 0.1% QoQ in USD terms). There was sequential improvementin EBIT margin(up 32 bps QoQ) led by lower SG&A cost. Employee attrition continues to moderate as LTM attrition decreased by 240 bps QoQ to 17.8%. 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 are taking more time for decision making, thus resulting in slowdown in discretionary IT investments. This continues to impact near term revenue performance. We expect revenue growth to pick up from H2FY24 led by robust deal booking and strong deal pipeline. Employee attrition is expected to come down going ahead and should support operating margin. We estimate revenue CAGR of 14.4% over FY23?25E with average EBIT margin of 17.9%. We maintain our BUY rating on the stock with revised target price of Rs 6,190/share at 29.0x on FY25E EPS. The stock trades at PER of 30.0x/24.1x on FY24E/FY25E EPS.
Result Highlights
* Reported revenue of Rs 87.0bn (up 0.1% QoQ in INR terms; up 0.1% QoQ in USD terms). The growth was led by BFSI vertical (up 12.1% YoY); Manufacturing and Resources (up 14.9% YoY). Hitech, Media and Entertainment stood strong for the quarter (up 3.2% QoQ). The cc growth was 0.1% QoQ.
* EBIT margin increased by 32 bps QoQ to 16.7%, led by decrease in SG&A Expenses.
* Reported healthy order inflow of $1.41bn for the quarter ($1.06 Bn in Q4FY23).
* Added 19 new clients compared to 31 new clients added in Q4FY23.
* Number of employees was down 1,808 QoQ to 82,738; LTM attrition was down 240 bps QoQ to 17.8%.
* Utilization (excluding trainees) was up 310 bps QoQ to 84.8%. Offshore effort mix increased by 10 bps QoQ to 85.2%.
* DSO remained flat QoQ to 60 days.
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