LTIMindtree shares climbed 5% today. Should you buy, hold or sell stock post Q2 results?

LTIMindtree Ltd reported a muted set of quarterly results but its shares climbed 5 per cent in Thursday's trade, as analysts noted that the IT firm's earnings were actually good in the context of weak industry environment. They said LTIMindtree valuations are more realistic now after the recent stock underperformance but leaves little scope for upside.  

Kotak Institutional Equities sees growth for LTIMindtree to be better than larger peers going ahead. Yet it cut its FY2024-26 revenue estimates for LTIMindtree by 1.1-2.4 per cent, largely due to high expectations, courtesy LTIMindtree's aggressive guidance at the beginning of the year.

"We forecast a CC revenue growth rate of 5.8 per cent in FY2024 and low teens in the subsequent years. We keep our margin estimates unchanged and tone down our forex gain assumption. Our Fair Value of Rs 5,350 implies a multiple of 24 times on September 2025E EPS. The LTIM stock has underperformed and trades at more realistic, albeit full valuations," it said.  The stock stood at Rs 5,407.95 on BSE, up 4.87 per cent.

Amidst escalating macro uncertainties leading to cautious client spending, LTIMindtree continues to strengthen its position as a partner of choice for their clients, said Choice Broking.

Although the management anticipates above-average furloughs in Q3, it is confident that robust order inflow and healthy deal pipeline will help the IT firm deliver a stronger H2, setting a promising stage for FY25.

Choice Broking has introduced FY26 estimates and expects revenue, EBIT and profit to grow at a CAGR of 11.2 per cent, 15.7 per cent and 14.7 per cent, respectively, over FY23-FY26E.

"We maintain our ADD rating and arrive at a revised target price of Rs 5,845 implying a PE of 26 times on FY26E EPS of Rs 225," the brokerage said.

YES Securities said sales growth may pick up for LTIMindtree from  H2FY24 led by robust deal booking and strong deal pipeline. Employee attrition is  expected to come down going ahead and should support operating margin, it said.

Nomura India, which called LTIMindtree's Q2 a mixed bag, said revenue growth in constant currency ters at 1.7 per cent was marginally below its estimate of 2 per cent. In dollar terms, BFSI vertical saw a decline of 1.1 per cent  QoQ  while manufacturing saw strongest QoQ growth of 5.2 per cent, it said, adding that EBIT margin at 16 per cent was ahead of its estimate of 15.8 per cent.

Nomura India had earlier cautioned on the company’s ability to hit double-digit growth in FY24. It now believes even hitting high-single-digit would be challenging.

"Even after baking in 2.5 per cent CQGR over Q3-Q4 FY24F(due to higher pass-through revenue), we see LTIMindtree hitting at best 6.5 per cent dollar revenue growth in FY24F. We lower dollar revenue growth forecast by 170 bps to 6.5 per cent for FY24F," it said while cutting target price on the stock to Rs 4,510 from Rs 4,585.

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