LTIMindtree Ltd For Target Rs. 6,430 By Elara Capital Ltd
Delay in margin expansion
LTIMindtree’s (LTIM IN) Q3 performance was steady in the backdrop of a seasonally weak quarter due to furloughs. Deal wins came in strong at USD 1.68bn in Q3. This is factoring in renewals, which typically see some bump-up in Q3 every year. Steady TCV provides visibility for future growth. Q4 will likely report revenue growth and margins may rise as the impact of wage hike seems behind now. LTIM is seeing some green shoots in verticals such as BFSI, Hi-Tech and Retail and is confident that discretionary spends may revive in FY26. In the medium term, LTIM may benefit from deal momentum and vendor consolidation opportunities. We do not see any risk to its target of USD 10bn revenues by FY31/32. The company continues to aspire for 17-18% EBIT margin in 2-3 years’ time. However, due to a major margin drop in Q3, the ‘margin expansion’ story seems to be in jeopardy for now. We expect some delay on that front – Recommend Accumulate.
Growth led by the US and BFSI: LTIM’s revenue grew 1.8% QoQ/5.6% YoY in CC. USD revenue grew 1.1% QoQ/5.1% YoY. INR revenue growth was 2.4% QoQ/7.1% YoY. Growth in Q3 was led by North America (75% of the revenue mix), up 0.7% QoQ and 8% YoY. Revenue from Europe was weak, down 2.7% QoQ. RoW revenue grew 9% QoQ in Q3. BFSI and Manufacturing led Q3 growth, up 3.4% QoQ/8.1% QoQ respectively. LTIM reported a strong TCV of USD 1.68bn in Q3. LTM attrition was down 20bps QoQ to 14.3%. LTIM added 2.4K headcounts in Q3.
Margin declined sequentially: LTIM’s EBIT margin declined by 170bps sequentially to 13.8%. Most of the drop in margin was on account of wage hikes in Q3. Wage hike-led margin decline was 220bps. LTIM has hiked wages for its employees, effective 1 October 2025. There was a 50bps tailwind in Q3 due to cost optimization initiatives as regards margins. LTIM is working on long-term margin levers such as cost optimization in sub cons, pyramid correction (it hired 1,400 freshers in Q3) and continued focus on utilization improvement. LTIM also mentioned that it continues to aspire for 17-18% EBIT margin in the 2-3 years.
Recommend Accumulate; TP pared to INR 6,430: We favor LTIM as it is riding on the strength of the BFSI vertical of the erstwhile LTI and on Travel and TMT specialty of Mindtree. LTIM continues to win large deals (it won two deals worth USD 50mn+ each in Q3 and is in pursuit of more such wins).
We do not see any risk to LTIM’s revenue growth story, given no major hurdle to its FY31/FY32 revenue aspirations. Its margin expansion story may be delayed by a few quarters given weak Q3. We recommend Accumulate with TP pared to INR 6,430 from INR 6,820, [as we cut our margin estimates in FY 26E/FY27E] while we continue to value this company based on 30x FY27E EPS of INR 214. Key downside risks are weaker-than-expected revenue growth and any sudden change in leadership.
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SEBI Registration number is INH000000933
