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* LTIMindtree Ltd. reported decent Q1FY25 revenues at $1,096.2mn, +2.6% QoQ/+3.7% YoY in cc terms (+2.5% QoQ and +3.5% YoY in USD terms) amidst green shoots in demand. INR revenue stood at INR91.4bn, up 2.8% QoQ and 5.1% YoY. Q1FY25 Order book TCV stood strong at $1.4bn. PAT for the quarter came in at INR11.3bn (-1.5% YoY). EPS stood at INR38.3. OCF to PAT was 109.9% while FCF to PAT was 88.6%.

* The company had a positive start to FY25E with signs of recovery in demand and hence it is expected that the momentum shall continue in Q2 as well. The broader macro environment has remained unchanged and businesses continue to adopt agile strategies to cope with the economic conditions. The focus shall continue to be on cost take-out and vendor consolidation deals. Company is seeing early signs of deploying the savings and additional budget towards kicking off high-priority transformation programs and making foundational investments for AI particularly in BFSI and Hi-tech, Media and Entertainment verticals. We expect FY25E to be better than FY24 with medium term growth visibility. As clients continue building their AI momentum and graduating AI beyond the proof-of-concept stages, LTIM is wellpositioned to capitalize on this opportunity. Company shall remain close to clients and adapt to the changes in the business environment.

* Many customers are looking to deploy AI use cases across the enterprise as more than 85% enterprises are looking to accelerate their AI related investments. Scaling of these AI solutions within the enterprise will require investments in infrastructure, data governance, data lineage, explainability etc. Knowledge management, customer service, intelligent content insights and generation, document summarization and software engineering are some key areas that are early adopters of AI and company is assisting majority of its top 100 clients in the same. Company is systematically investing in its Canvas.AI platform to enable customers in this journey.

* The operating margins for Q1 came at 15%, down 168bps YoY led by higher visa costs and SG&A costs on account of travel and marketing events. Margin improvement levers are identified as growth, pyramid rationalisation and reduction in discretionary spends. The margin improvement program is in place and will help improve margins steadily QoQ as growth momentum continues. The aspirational band is maintained at 17-18%.

Valuation: The company has a strong order inflow and healthy deal pipeline, setting the stage for medium-term growth. With green shoots visible, management has a significant runway to capitalize on the value preposition it brings to their clients. The stock has already rallied ~10% in a month and hence we downgrade our rating to REDUCE to arrive at a revised target price of INR5,715 implying a PE of 29x (modified) on FY26E EPS of INR197.

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