LTIMindtree shares fall 6% on Q3 results; Analysts see limited scope for re-rating

Shares of LTIMindtree Ltd. declined 6% on Tuesday, January 20, as analysts, led by CLSA, saw limited scope of re-rating on the stock after its third quarter results, that were reported after market hours on Monday.

Despite the warning, CLSA retained its positive stance on the stock, while Morgan Stanley and Nomura remained "neutral". Citi has a bearish view on the stock.

Here's a look at what analysts had to say:

CLSA

CLSA has an "outperform" call on LTIMindtree with a price target of ₹7,067 per share, implying a potential upside of 10.3% from its previous closing price of ₹6,407 apiece.

It said the company's third quarter performance was in-line with estimates, the it has maintained its guidance for double-digit revenue growth by the fourth quarter.

LTIMindtree witnessed strong deal wins across BFSI, public markets, consumer and media. The deal ramp-ups offset AI-led productivity impact, according to CLSA, adding that the key accounts are set to bottom out in the fourth quarter.

However, the stock has limited scope for re-rating, with earnings-per-share (EPS) growth will drive its upside, CLSA's note said.

Morgan Stanley

The brokerage has an "equal-weight" rating on the stock, with a price target of ₹6,300 per share, indicating a potential downside of close to 2% from Monday's closing levels.

It said the positives include growth in top hi-tech client and BFSI bottoming out, although near-term margin pressure remains a concern. At the current valuation, the risk-reward is balanced, as per Morgan Stanley's view.

Nomura

Nomura too has a "neutral" rating on LTIMindtree with a price target of ₹5,900 per share, indicating a potential downside of 7.9% from Monday's close.

It said the third quarter results range from in-line to a modest miss depending on the parameters. The earnings before interest and tax (EBIT) margin is at 16.1%, which is below their estimates.

Citi

Citi has a "sell" rating on LTIMindtree with a price target of ₹5,415 per share, indicating a potential downside of 16.8% from its previous close.

It said the company's revenue was aided by seasonal pass-throughs, while margin was helped by lower selling, general and administrative (SG&A) expenses.

Q3 performance

The company reported a mixed performance in the December quarter, with its net profit declining sharply from last year due to a one-time impact from new labour codes, even as its revenue and operating margins beat estimates.

LTIMindtree's net profit of ₹959.6 crore was well below a CNBC-TV18 poll of ₹1,417 crore. It also declined 30.5% sequentially from 1,381 crore.

Its revenue of ₹10,781 crore was marginally above Street estimates of ₹10,738 crore and was up 3.7% sequentially. Dollar revenue increased 3% sequentially to $1,208 million.

LTIMindtree's earnings before interest and tax (EBIT) was at ₹1,737 crore, in comparison to the CNBC-TV18 poll of ₹1,719 crore. However, EBIT margin expanded to 16.1% from 15.9% in the previous quarter.

Of the 48 analysts that have coverage on the stock, 23 have a "buy" rating, 12 have a "hold" rating and eight have a "sell" rating.

Shares of LTIMIndtree were down 6.3% at ₹6,011.5 apiece around 10.10 am on Tuesday. The stock has gained 17% in the last six months.

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