LTIMindtree Ltd. share price target

Larsen & Toubro Infotech (LTI) disappointed with a weak set of Q4FY22 earnings on various fronts. Revenues were way below our estimate at US$570mn (+3.6% QoQ CC vs Isec. est. of +5.3% QoQ CC).

Q4 revenue growth of 3.6% QoQ CC below our estimate of 5%; however, net new TCV robust at US$ 80mn, up 21% YoY

Retained PAT margin guidance of 14-15%, however we believe that margin will remain under pressure near lower end of guidance in FY23. LTI reported a miss in revenue growth (3.1% QoQ USD in Q4), partly due to lower onsite volume (-0.4% QoQ USD) impacted by high onsite attrition. However, we expect revenue momentum to continue (~19% YoY in FY23E) in the near term given - 1) 4 large deals with TCV $80mn+ won in Q4, 2) deal pipeline at ~$2bn with 50% deals in late stage including 4 deals in contracting...

LTI continues to benefit from one of the strongest ever demand environments and sees it continuing over the next three-to-five years. The management reassured of industry-leading growth in FY23 as demand remains strong. It doesn't see any postponement in demand, despite a volatile macro environment and geopolitical issues. LTI is one of the best placed companies in our coverage universe, with a strong client mining ability. Moreover, robust employee addition and its target to hire over 6,500 freshers in FY23 provides further demand visibility. We expect it to deliver...

all companies in NIFTY IT Index, several mid-cap, small cap IT firms and new age internet players. Management commentary across companies indicate that strong demand environment is expected to continue over medium term and revenue growth is no longer contingent on winning large deals. Pricing environment has also improved. Additionally, companies are doing aggressive fresher hiring resulting in pyramid balancing which will provide considerable margin tailwinds in FY23....

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Ability to win large deals, presence in niche verticals, effectively mine clients, adding Fortune 500 clients and digital prowess other key drivers Vendor consolidation opportunity and digital acceleration. We expect LTI to...

We attended LTI's Analyst Day, where the management a) reiterated its guidance for strong broad-based growth for the coming 35 years and b) highlighted The Great Restructuring' as a key driver of the demand tailwind. The management remains confident about this growth trajectory and mentioned six factors that would drive growth demand, capability, talent, sales and marketing, team, and operational resilience. The company continues to expect faster growth than the industry average growth of 9%+ as digital transformation led demand fuels client spending. It...