Shares of LTIMindtree traded with gains, looking set to break the five-day losing streak on March 15, as most brokerage firms retained their positive views on the stock, a day after the company's investor meet.
As highlighted by brokerage firms, the company's management expects to deliver consistent industry-leading profitable growth and aims to add revenue synergies of $1bn by FY26.
The company's large deal pipeline continues to remain robust with 68 large deals worth a total contract value of $3.2 billion.
LTIMindtree stock, despite its rich valuation, remains among the top picks from the IT space for many brokerage firms.
Brokerage firm ICICI Securities maintained a 'buy' call on the stock with a target price of ₹5,651, implying a 24 percent upside from the stock's March 14 closing of ₹4,566.75 on BSE after it attended ‘LTIMindtree Investor Day 2023’ on Tuesday.
ICICI highlighted that LTIMindtree's management reiterated its aspiration to achieve $1bn incremental revenue through cross-sell synergies over the next two-to-four years and reach 19-20 percent EBIT margins by FY27.
"We continue to assume 14.5 percent dollar revenue CAGR over FY23-26E given (1) strong cross-sell/up-sell opportunities, (2) ability to participate in larger deals post-merger and strength in hyperscaler and SaaS partnership-led sales," ICICI Securities said.
The brokerage firm expects LTIMindtree's EBIT margin to improve by 260bps over FY23E-FY26E to 18.6 percent, in line with management guidance to improve margins to 19-20 percent by FY27.
"The growth in EBIT margin will be led by operating leverage with a higher scale of operations and integration-related synergies around both employee costs and SG&A (selling, general and administrative expenses; also known as operating expenses) leading to 20 percent earnings per share (EPS) CAGR over FY23-26 (highest in our coverage universe)," ICICI Securities said.
"We see strong management execution track records in the past at both Mindtree and LTI to become the bedrock for LTIMindtree to ensure industry-leading profitable growth in coming years. LTIMindtree remains our top pick in the sector," said ICICI Securities.
Brokerage firm Nuvama Wealth Management has a 'buy' call on LTIMindtree stock after the company's investor meet.
It has fixed a target price of ₹5,550 on the stock, implying a nearly 22 percent upside and said LTIMindtree remains its top sectoral pick.
"We have a positive stance on LTIMindtree as the size and complementary business profiles of LTI and Mindtree shall help the merged entity outperform peers over three–four years. We view the third quarter’s soft performance as an aberration in an otherwise robust growth story," said Nuvama.
The brokerage firm highlighted that LTIMindtree's management continues to be upbeat on mid-to-long-term growth prospects while remaining cautious about the near term.
"They remain confident of delivering industry-leading growth driven by its resilient blue-chip accounts, and strong presence in the data, cloud, cyber, and experience domains. Management plans to focus on: (i) driving growth ($1bn synergies); (ii) cost synergies (150–200bp margin expansion); (iii) capital allocation (return on capital employed is more than 40 percent); and (iv) creating shareholder value," said Nuvama.
Brokerage firm Motilal Oswal Financial Services has a 'neutral' view on the stock with a target price of ₹4,590.
"LTIMindtree as a combined entity has deep domain capabilities, strong partnerships with hyperscalers, and a robust sales engine, which will result in industry-leading growth. We expect a dollar revenue CAGR of nearly 13 percent over FY23-25, which is at the top end of our tier-I IT coverage universe," said Motilal Oswal.
Technical analysts observe there are some positive signs on the technical front but the stock needs to sustain above the level of ₹4,850.
Vaishali Parekh, Vice President - Technical Research at Prabhudas Lilladher, highlighted that the stock has recently witnessed some profit booking from the levels of ₹4,975.
"It has touched the 200DMA (daily moving average) level of ₹4,530 from where we anticipate a pullback recovery with improvement in the bias," said Parekh.
"The stock needs to decisively move past the level of ₹4,850 for improving the trend and establish some conviction for a further upward move. The levels near ₹4,530 would be crucial and a decisive breach below it would weaken the trend further with the next major support visible near ₹4,350-4,300 zone," said Parekh.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.
