LTIMindtree share price falls 3% after Q4 result; experts divided about the stock

LTIMindtree Q4 result

LTIMindtree’s Q4FY24 net profit declined 1.2 per cent year-on-year (YoY) to ₹11,007 crore amid weakness in its banking vertical and persisting merger issues at the company.

LTIMindtree declared a final dividend of ₹45 per equity share for the financial year ended March 31, 2024.

Also Read: Q4 results: LTIMindtree declares final dividend of ₹45 per equity share

As Mint reported, LTIMindtree reported a drop in quarterly revenue for the first time since the company came into existence in November 2022.

Also Read: LTIMindtree reports drop in quarterly revenue, margin falls further

Brokerages express mixed views

LTIMindtree share price has gained nearly 13 per cent over the last year against a 23 per cent gain in equity benchmark Sensex.

Many experts and brokerage firms do not look upbeat about the stock’s growth prospects.

Sanjeev Hota, Head of Research at Sharekhan by BNP Paribas has a hold rating on the stock. He pointed out that LTIMindtree reported weaker than expected revenue de-growth in constant currency terms.

“LTIMindtree has been missing estimates for a few quarters reflecting weakness and pressure amid a challenging environment. Further, top management exits, which were foreseen as key risks at the time of the merger, seem to be playing out and are likely to deter and defer the gradual recovery in the near to medium term,” said Hota.

Also Read: Axis Bank share price rises 5% buoyed by healthy Q4 numbers; should you buy, sell or hold? Here’s what experts say

Brokerage firm Nirmal Bang has a sell call on the stock with a target price of ₹3,978, implying a 16 per cent downside as it said LTIMindtree posted below estimates numbers.

“LTIMindtree posted Q4FY24 below our as well as consensus estimates. Although it sees Q4FY24 as a one-off and is confident of growth from Q1FY25, there was no clarity on whether FY25 revenue growth will be better than that in FY24 (which was up 4.2 per cent YoY in CC terms),” Nirmal Bang said.

The brokerage firm trimmed its earnings per share (EPS) estimates for FY25-FY27 by nearly 9 per cent due to both revenue and margin cuts. W

“We have raised the discount to the target PE multiple of TCS to 15 per cent from 10 per cent and now use a target PE multiple of 20.1 times due to weaker-than-expected execution through FY24. While medium-term prospects of faster than tier-1 earnings growth and very high ROICs remain, the current valuations are excessive,” Nirmal Bang said.

Motilal Oswal Financial Services has a ‘neutral’ view of the stock with a target price of ₹5,020. Motilal has reduced its FY25 and FY26 earnings estimates by about 6 per cent and 9 per cent, respectively, after cuts in revenue and profitability.

“LTIMindtree is currently trading at 24 times FY26E EPS, which adequately captures the growth opportunities ahead,” said Motilal Oswal.

However, some brokerage firms remain hopeful about LTIMindtree’s prospects.

Nuvama Wealth Management retained its buy call on the stock with a target price of ₹6,650, implying a 41 per cent upside potential. It said it remains confident of LTIMindtree’s fundamentals, although it might take some time to get back onto a strong growth path.

“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 are tweaking FY25E/26E EPS (less than 1 per cent),” said Nuvama.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 25 Apr 2024, 11:42 AM IST