Buy LTIMindtree Ltd For Target Rs. 6,360 - Yes Securities
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Result Synopsis
LTIMindtree (LTIM) reported inline financial performance for the quarter. Both, the revenue growth and EBIT margin were as per expectation. It reported constant currency growth of 1.7% QoQ, led by BFSI vertical (up 5.9% YoY); Manufacturing and Resources (up 16.2% YoY). On reported basis, revenue grew by 2.3% QoQ in INR terms (up 1.6% QoQ in USD terms). There was sequential decline in EBIT margin(down 69 bps QoQ) led by impact of wage hike in the quarter. Employee attrition continues to moderate as LTM attrition decreased by 260 bps QoQ to 15.2%. The near term demand environment remains challenging as 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 12.6% over FY23?25E with average EBIT margin of 17.7%. We maintain our BUY rating on the stock with revised target price of Rs 6,360/share at 30.0x on FY25E EPS. The stock trades at PER of 30.9x/24.4x on FY24E/FY25E EPS.
Result Highlights
* Reported revenue of Rs 89.1bn (up 2.3% QoQ in INR terms; up 1.6% QoQ in USD terms). The growth was led by BFSI vertical (up 5.9% YoY); Manufacturing and Resources (up 16.2% YoY). Retail, CPG, Travel and Hospitality stood strong for the quarter (up 3.0% QoQ). The cc growth was 1.7% QoQ.
* EBIT margin decreased by 69 bps QoQ to 16.0%, led by increase in SG&A Expenses (up 11.4% QoQ) and impact of wage hike in the quarter
* Reported healthy order inflow of $1.3bn for the quarter ($1.4 bn in Q1FY24).
* Added 30 new clients compared to 19 new clients added in Q1FY24.
* Number of employees was up 794 QoQ to 83,532; LTM attrition was down 260 bps QoQ to 15.2%.
* Utilization (excluding trainees) was up 180 bps QoQ to 86.6%. Offshore effort mix remained flat QoQ at 85.2%.
* DSO increased by 8 days QoQ to 68 days.
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