In the wake of LTI Mindtree’s disappointing Q3 earnings, its shares witnessed a significant 14% drop in early trade on January 18. The company fell short of Street estimates across key metrics, and cautious remarks from management have triggered concerns among brokerages, foreseeing potential challenges for the IT major in Q4.
As of 9:44 am, LTI Mindtree shares were trading at Rs 5,569.20 on the NSE. Notably, trading volumes surged, with 9 lakh shares changing hands, surpassing the one-month daily traded average of 4 lakh shares.
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Despite posting a 0.6% sequential increase in net profit to Rs 1,169 crore and a 1.2% on-quarter rise in revenue to Rs 9,016 crore in Q3, the company’s operating margin contracted to 15.4% from 16% last quarter. This contraction was attributed to high furloughs and low discretionary spends.
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However, LTI Mindtree’s net profit, revenue, and operating margins fell short of analyst estimates. The company did manage to achieve its highest-ever quarterly deal pipeline at $1.5 billion in Q3, despite facing heightened seasonality and more furloughs than expected.
Brokerage houses weighed in on LTI Mindtree’s performance
Motilal Oswal on LTI Mindtree
Motilal Oswal values the stock at 30x FY26E EPS, with the current valuation limiting significant upside from the current market price (CMP). The brokerage reiterates a Neutral rating with a target price of INR 6,600. The near-term slowdown in discretionary spending and significant exposure to BFS could impact growth. Motilal Oswal expects a 9.7% CAGR in USD revenue over FY23-26 and anticipates a PAT CAGR of 13% over the same period.
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Jefferies on LTI Mindtree
Jefferies notes that LTI Mindtree’s 3Q results fell short of estimates due to deeper-than-expected furloughs. While management anticipates near-term weakness to persist and a muted 4Q, strong deal Total Contract Value (TCV), up 20% YoY, and plans for increased hiring offer growth visibility. Although the margin target of 17-18% has been deferred, Jefferies expects margins to expand meaningfully over FY24-26E. The brokerage maintains a Buy rating with a price target of Rs 7,200.
