LTIMindtree, the new Nifty entrant, is expected to report a single-digit rise in net profit for the June quarter on a double-digit rise in sales. Dollar revenue is seen rising 0.5 per cent sequentially while Ebit margin is seen expanding sequentially (but falling YoY). Investors would be looking out for commentary on BFSI vertical, margins outlook of merged entity and any revision in FY24 guidance.
Shares of LTIMindtree have recently been added to Nifty elite club. The stock is up 17 per cent year-to-date. This is against a 7.5 per cent rise in the Nifty during the same period. The stock has an average share price target of Rs 5,023, as per Trendlyne, which suggests the upside is capped for the IT major.
As far as Q1 earnings go, HSBC said LTIMindtree's revenue is likely to be flat QoQ in constant currency (CC) terms. While there are green shoots in LTIMindtree's hi-tech portfolio, BFS vertical remained weak in the June quarter, it said. This brokerage sees net profit rising 7.8 per cent YoY to Rs 1,193 crore compared with Rs 1,106.60 crore in the year-ago quarter. Revenue is seen tising 14.3 per cent YoY to Rs 8,736.10 crore from Rs 7,644.20 crore. Ebitda margin is seen at 16.6 per cent against 16.4 per cent in March and 17.4 per cent in the year-ago quarter.
"We estimate margins in Q1 to be mostly flat with a slight positive bias; cost optimisation & lower M&A expenses are tailwinds, though lower volumes could hinder meaningful margin recovery in the quarter," LTIMindtree said.
PhillipCapital sees profit at Rs 1,196.50 crore, up 8.2 per cent YoY. It sees revenue rising 14 .6per cent YoY to Rs 8,762.50 crore. It sees Ebit margin at 16.6 per cent.
"We expect CC revenue growth of 0.6 per cent QOQ due to weakness in BFSI vertical in Q1. Hitech is expected to bounce back in Q1. Margins expected to expand marginally by up 20 bps on cost optimisation initiatives," it said.
Kotak Institutional Equities said it expects healthy growth in total contract value (TCV) signings on YoY basis aided by large deal wins. Both LTI and Mindtree on a standalone basis have capability to win large deals in managed services, it cited.
"The combined entity has won quite a few deals involving integrated service offerings, which were showcased during March 2023 analyst day meet. We expect investors to focus on timeline for early benefits from revenue synergies to flow into revenue, health of deal pipeline and conversion rates, timing of ramp-up of recently won large deals and their impact on margins, more details of new organisation structure and outlook for Mindtree's portfolio given slowing cloud consumption and prudence in discretionary spending by clients," Kotak said.
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Tech spending outlook of key US and European banks considering high exposure to the segment, positioning in cost take-out deals and vendor consolidation and levers to offset high wage inflation will also be keenly watched.
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