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Published: October 21, 2024
Updated: October 21, 2024

LTIMindtree Shares Slip 6% After Q2 Earnings: Key Insights, Targets, and Risks

Stock Decline Post-Q2 Earnings Report

Shares of LTIMindtree, a global software and consulting giant, saw a significant dip of 6.20% following the announcement of its Q2 earnings. The stock fell to Rs 6,004 from its previous close of Rs 6,401.50 on the BSE, resulting in a market cap drop to Rs 1.79 lakh crore. Despite a solid performance, some concerns over margins led to this market reaction.

Strong Q2 Performance: Profit and Revenue Growth

LTIMindtree reported a 10.3% sequential increase in profit, reaching Rs 1,251.6 crore for the quarter. Revenue also climbed 3.2% quarter-on-quarter, hitting Rs 9,432.9 crore. This growth was driven by a broad-based performance across various verticals and regions. CEO Debashis Chatterjee highlighted the firm's strong deal momentum, with several multi-year deals, including one valued at over $200 million. Additionally, the company's board approved an interim dividend of Rs 20 per share.

Earnings Before Interest and Tax (EBIT) Margins See Slight Improvement

The company's EBIT margin saw a marginal rise to 15.5% from 15% in the previous quarter. Free cash flow, however, declined, standing at Rs 681.9 crore for the July-September period, compared to Rs 1,005.3 crore in the preceding quarter. Despite this, the company's Q2 hiring, including fresh graduates, positions it favorably for the remainder of the fiscal year.

Analyst Opinions: Targets and Caution on Margins

Various brokerage firms provided mixed opinions on LTIMindtree's stock. Motilal Oswal remains bullish, setting a target price of Rs 7,400, forecasting a 16% upside. However, the firm expressed concern over margin pressures, citing wage hikes, deal ramp-ups, and hiring as potential challenges in the second half of FY25. On the other hand, Choice Broking issued a "reduce" call, with a target of Rs 6,642, suggesting a more conservative outlook. They highlighted the company's strong positioning but cautioned about future margin pressures and the headwinds the company could face.

Nuvama and Sharekhan's Bullish Outlook

Nuvama set a higher price target of Rs 7,550, pointing out the company’s robust performance in its largest segments, BFSI and Hi-tech, and stable deal pipeline. Despite slightly lowering FY25E/26E earnings forecasts, Nuvama maintained a "buy" rating. Similarly, Shaji Nair of Sharekhan by BNP Paribas praised the company's continued deal momentum and hiring efforts, particularly in fresh talent, positioning LTIMindtree well for H2FY25. Sharekhan also recommended a "buy" rating, emphasizing the strong growth after a few muted quarters.

Positive Growth, Margin Risks Ahead

LTIMindtree has posted a solid Q2 performance, with growth in profit, revenue, and deal wins. However, margin pressures remain a key concern, potentially impacting the company's future earnings. While analysts have mixed views on the stock, LTIMindtree's continued focus on deal momentum, key verticals, and hiring strategies will play a crucial role in determining its success in the second half of FY25.