LTIMindtree shares tumble 10% on weak Q3 earnings, ratings downgrades. How to trade now? - The Economic Times

IT services company LTIMindtree tanked nearly 10% in Thursday’s trade to the day's low of Rs 5,666 following a lower-than-estimated December quarter earnings and ratings and target downgrades by a clutch of top brokerages. While CLSA has maintained a 'Sell' call, Kotak Institutional Equities and InCred have recommended a 'Reduce' rating. Others including Motilal Oswal and Nuvama have stayed with neutral and buy ratings.
LTIMindtree on Wednesday reported a consolidated net profit rose 17% year-on-year (YoY) to Rs 1,169 crore for the quarter ended December 2023. The same stood at Rs 1,000 crore a year ago. Revenue from operations in the same period increased by 5% to Rs 9,017 crore as against Rs 8,620 crore in the December quarter of last year.

Read More: LTIMindtree Q3 Results: Net profit rises 17% YoY to Rs 1,169 crore, meets estimates

Here's what brokerages recommended:

CLSA: Sell | Target: Rs 4,800

CLSA has downgraded the stock to Sell from an earlier outperform rating and reduced the price target to Rs 4,800 from Rs 5,281. The Q3 results were below Street estimates, with growth driven by seasonality, the Hong Kong-based brokerage noted. Earnings Before Interest and Taxes (EBIT) margin had a miss on estimates due to furloughs.

Kotak Equities: Reduce | Target: Rs 5,500

LTIM reported a weak quarter with muted 0.7% quarter-on-quarter growth and EBIT margin decline of 60 bps, both missing estimates, Kotak said in its post-earnings review as it recommended a 'Reduce' stance while cutting the target price to Rs 5,500 from Rs 5,910 earlier. Management indicated weak near-term growth and a delay in margin ambition due to demand challenges, Kotak said as it highlighted the need for LTIM to demonstrate visible translation of synergies to deals and revenue and increase the growth gap with Tier 1 peers to justify premium valuations.

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"A shift in the outlook on demand and profitability is disappointing and drives 4-5% EPS downgrades for FY2024-26E. Stock trades at expensive valuations of 27X FY2025E and will correct after poor results," this brokerage opined.

Motilal Oswal: Neutral | Target: Rs 6,600

Calling earnings as "disappointing" with a weak near-term outlook acting as a drag on FY25 growth, Motilal reiterated its 'Neutral' rating with a target price of Rs 6,600. "We value the stock at 30x FY26E EPS. The current valuation of 29x FY26E EPS limits any meaningful upside from the CMP," it said.

Nuvama: Buy | Target: Rs 7,000

Calling LTIMindtree's Q3FY24 earnings weak and below expectations, Nuvama has cut the price target to Rs 7,000 from Rs 7,350 while retaining a buy stance. The management commentary also did not exude much confidence as the company grapples with delayed decision-making and weak macros, the brokerage said.

"We are cutting FY24E/25E/26E EPS sharply by 3.2%/8.9%/5.2%. That said, we remain confident of the company’s fundamentals and continue to value the stock at FY26E PE," Nuvama said.

InCred: Reduce | Target: Rs 5,657

InCred has downgraded the stock to 'Reduce' from 'Hold' even as it hiked the target price to Rs 5,657 from Rs 5,264. The Q3 earnings were a miss on all fronts, this brokerage said, noting the company's weak Q4FY24 revenue guidance and commentary that has driven a cut in estimates. "Weak revenue delays aspiration to exit with a 17-18% EBIT margin in FY24F," InCred said.
Among positives, deal wins and order pipeline remain healthy.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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LTIMindtree shares tumble 10% on weak Q3 earnings, ratings downgrades. How to trade now? - The Economic Times
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