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25-04-2024 12:06 PM | Source: PR Agency
Views on LTIMindtree Ltd Q4FY24 Result by Dhruv Mudaraddi, Research Analyst, StoxBox
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LTI Mindtree's Q4FY24 performance indicates a challenging landscape marked by missed revenue and PAT estimates, primarily attributed to lower pass-through revenues and a sluggish demand environment. Margin levers such as pyramid rationalization and productivity enhancements offer potential, but the company faces hurdles. Despite a robust utilization rate of 86.9%, higher than peers, investments in fresher additions are necessary, potentially limiting margin improvements. Furthermore, the higher cost of deal wins coupled with minimal growth leverage may hinder significant margin enhancement. The transition period for recent deal wins is expected to be prolonged, with clients redirecting savings from traditional business optimization towards discretionary projects, potentially cannibalizing existing revenue streams. Moreover, frequent leadership attrition poses risks to execution timelines. As LTI Mindtree prepares for FY25, initial growth commentary is likely to be cautious, with a focus on maintaining margin guidance amid uncertainties. The commentary on demand and client spending will be closely monitored for signs of recovery.
LTI Mindtree's Q4FY24 performance indicates a challenging landscape marked by missed revenue and PAT estimates, primarily attributed to lower pass-through revenues and a sluggish demand environment. Margin levers such as pyramid rationalization and productivity enhancements offer potential, but the company faces hurdles. Despite a robust utilization rate of 86.9%, higher than peers, investments in fresher additions are necessary, potentially limiting margin improvements. Furthermore, the higher cost of deal wins coupled with minimal growth leverage may hinder significant margin enhancement. The transition period for recent deal wins is expected to be prolonged, with clients redirecting savings from traditional business optimization towards discretionary projects, potentially cannibalizing existing revenue streams. Moreover, frequent leadership attrition poses risks to execution timelines. As LTI Mindtree prepares for FY25, initial growth commentary is likely to be cautious, with a focus on maintaining margin guidance amid uncertainties. The commentary on demand and client spending will be closely monitored for signs of recovery.
LTIMindtree Ltd. Q4FY24 Result First Cut ~ Financial performance below estimates; All time high order inflow
- Reported revenue declined to Rs. 8,893 crores (down 1.4% QoQ / up 2.3% YoY) in rupee terms, missing market estimates of Rs. 8,975 crores, owing to degrowth in the BFSI and manufacturing verticals and lower pass-through revenues. Growth in healthcare, consumer business and technology verticals partially offset the decline.
- EBIT declined (down 5.6% QoQ / up 1.9% YoY) to Rs. 1,516 crores, exceeding market expectations of Rs. 1,388 crores. The EBIT margin came at 17.1% (down 75 bps QoQ / down 7 bps YoY) due to higher cost of deals, peaking utilization, and a slower-than-expected reversal of furloughs.
- Net income reduced to Rs. 1,101 crores (down 5.9% QoQ / down 1.2% YoY), missing market estimates of Rs. 1,169 crores. The PAT margin contracted to 12.4% (down 59 bps QoQ / down 44 bps YoY).
- LTM attrition rose to 14.4% (up 20bps QoQ) in Q4FY24.
- Order inflow recorded for FY24 stood at $5.6 billion, up 15.7% YoY. Q4FY24 saw an order inflow of $1.4 billion.
- LTIMindtree reported a headcount of 81,650 employees as of March 31, 2023. The utilization ex. trainees declined 50 bps QoQ to 86.9%.
- The management has declared a final dividend of Rs. 45 per share.
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