LTIMindtree shares drop 2.5% after disappointing Q4 results. Should you buy?

On Thursday, shares of the IT service company LTIMindtree dipped 2.5% to touch the day's low at Rs 4,611 on the BSE, as the company's Q4 results failed to meet market expectations.

Shares of the IT service company, fell 2.5% on Thursday to hit the day’s low at Rs 4,611 on BSE after the Q4 results of the company failed to impress the street. The company reported a consolidated net profit of Rs 1,100 crore for the March quarter, down 1% year-on-year (YoY). The profit was less than the Street estimate of Rs 1,150 crore.

LTIM posted a weak quarter and the near-term outlook remains bleak, said Motilal Oswal. LTIM’s revenue declined 1.3% QoQ CC in 4QFY24 vs. the brokerage firm’s estimate of 1.4% QoQ CC growth. The growth was hit by two project cancellations in BFSI as clients reprioritized their spending.

However, the report added that the deal wins were strong at nearly $4 billion (1.4x Book-to-Bill), and the management commentary on the deal pipeline was robust.

The report states that technology and healthcare led the growth for LTIM by 5.1% and 4.5% QoQ, while manufacturing took a major hit, down by 9.6% QoQ. EBIT margins were at 14.7% which missed the brokerage firm’s estimate of 15.8%.

“The near-term slowdown in discretionary spending and its meaningful exposure to BFS would have an adverse impact on its growth performance. We expect a 7.9% CAGR in USD revenue over FY23-26. Margin recovery is expected to take time. Margins should improve meaningfully only once growth revives. We estimate a PAT CAGR of 9.8% over FY23-26,” states Motilal Oswal.

The domestic broker reiterated its ‘neutral’ rating for the stock and has decreased the target price for the same to Rs 5,020.

Here’s what other brokerages have to say about the company:

Nuvama Wealth

LTIMindtree (LTIM) delivered modest Q4FY24 results, but in line with expectations. “Management commentary, though soft, is much more sanguine than

Q3FY24’s—the company expects growth to return next quarter, and to build upon that. We remain confident of LTIM’s fundamentals, although it might take some time to get back onto a strong growth path,” states the Nuvama report.

Nuvama has retained a ‘buy’ rating for the stock with a target price of Rs 6,650.

Nomura

LTIM’s was below Nomura’s estimates. BFSI and manufacturing had the sharpest sequential drop QoQ for the company. EBIT margin too stood at 14.7% (-70bp q-q), missing the estimate of 15.0%. As per the brokerage firm, there seems to be no meaningful recovery in sight and hence they have retained a ‘reduce’ rating for the stock with a target price of Rs 4,170.

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Source: Stocks-Markets-Economic Times