LTIMindtree, which are among to stocks to be excluded from Nifty 50 in the September rejig, saw its shares rallying 8 per cent in Wednesday's trade after Kotak Institutional Equities upped its rating to 'ADD' against "Reduce' earlier and upgraded its target price to Rs 6,200 from Rs 5,500 earlier, saying the IT major will be a key beneficiary of the recovery in the impacted segments of banking and financial services (BFS) and hi-tech sectors.
On Wednesday, the stock almost kissed the Kotak's target at day's high of Rs 6,199.30 on BSE, as it climbed 7.82 per cent over its previous close. Later, it was trading at Rs 6,046.60, up 6.91 per cent. Kotak expects LTIMindtree to be a good compounding play with a strong and consistent EPS growth trajectory.
"We expect LTI Mindtree Ltd to bounce back from the trough of FY2024 in the next couple of years. We expect consistent strong growth in a normalized demand environment, given the strong client profile, strength in key spend areas of clients, ability to address both growth and cost take-out agendas of clients and an experienced management team," it said.
Kotak expects LTIMindtree to report a revenue growth of 6.5 per cent in FY2025, which may further accelerate to 11 per cent in FY2026 from 4.4 per cent in FY2024 on the back of a recovery in the two largest verticals—BFSI and hi-tech.
Kotak's analysis indicates that a recovery in tech spending is on the cards for BFS, especially in the US, where LTIM will be a key beneficiary, courtesy of its presence in fast-improving segments such as capital markets and in-demand areas such as risk and compliance and core modernisation.
LTIMindtree, Kotak said, is also a beneficiary of consolidation deals in the banking vertical with clients such as ABSA.
"We expect hi-tech to benefit from continued strength in the top account. Pressure among clients in retail and manufacturing verticals will create growth headwinds but will be manageable, in our view," it said.
Kotak has upped its FY2025-27E dollar revenue growth estimate by 0.5-1 per cent, leading to a similar increase in EPS estimates. It now values the LTMindtree stock at 28 times September 2026 earnings against 26 times earlier.