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*/ LTIM posted revenue growth of 0.1% QoQ/8.2% YoY CC in 1QFY24 vs. our estimate of 0.5% QoQ. Adjusting for 4QFY23 pass-through revenue impact, it grew 0.9% QoQ CC. Growth was led by Hi-Tech, Media and Entertainment (+3.2% QoQ) and Healthcare (+5.0% QoQ), while BFSI, Manufacturing and Retail declined QoQ. EBIT margin stood at 16.7%, in line with our estimate.

* While LTIM delivered strong order inflow of USD1.41b in 1Q, the management retracted from providing FY24 guidance and acknowledged that double-digit growth seems challenging in FY24. Management commentary mirrored its peers on low demand visibility, pushout of deal scale-up despite strong deal flow momentum, and a shift in new wins toward cost optimization from discretionary deals seen over the last two years. The management expects a pick-up in Hi-tech to continue for the rest of the year on the back of strong deal wins. While the budgets remain intact, BFSI and Retail continue to be impacted by slower decision-making and delayed ramp-ups.

* Given the limited visibility on deal starts, we expect LTIM’s revenue growth recovery to be gradual, and estimate FY24 USD CC revenue growth at 7.3% YoY. We continue to see LTIM as well placed to gain from a healthy mix of cost-takeout deals and transformation spending. We expect a strong recovery in FY25, with a USD revenue CAGR of 11% over FY23-25E despite weak macro.

* LTIM saw 30bp margin improvement in 1QFY24 (in line), partially due to a lower employee base (down 2.2% QoQ). Utilization was up 150bp QoQ (on reclassified base). The management remained confident about 17-18% exit EBIT margin for FY24 despite wage hikes in 2QFY24. We expect the company to deliver EBIT margin at the lower end of its guidance in FY24 at 16.5%, followed by a 140bp pickup in FY25 to 17.9%. This should help LTIM clock a PAT CAGR of 16.1% over FY23-25E.

* Our TP of INR4,700 implies 23x FY25E EPS. We maintain our Neutral rating.

Inline Q1 performance driven by Hi-Tech

* CC revenue was up 0.1% QoQ and 8.2% YoY, INR EBIT grew 9.3% YoY, and INR PAT was up 4.1 YoY in 1QFY24.

* The performance was led by Hi-Tech, Media & Entertainment (+3.2% QoQ) and top 5 clients (+5.2% QoQ). BFSI, Manufacturing and Retail declined QoQ.

* EBIT margin at 16.7% (+30bp QoQ) was in line with our estimate.

* The order inflow remained strong at USD1.41b vs. USD1.35b in Q4FY23. ? PAT came in at INR 11.5b, up 3.4% QoQ and 5% below our estimate, due to lower other income.

* Free cash flow stood at INR8.4b, translating to 73% of net income.

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