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Published 14:15 IST, August 28th 2024

LTIMindtree shares jump 8% on Kotak upgrade, GST relief

Kotak Institutional Equities has upgraded the rating on LTIMindtree to 'Add' from 'Reduce', with a higher target price of Rs 6,200.

Reported by: Business Desk
LTIMindtree stock surge | Image: Republic

Shares of LTIMindtree jumped 7.77 per cent to an intraday high of Rs 6,198.90 on the National Stock Exchange as Kotak Institutional Equities upgraded the stock along with a favourable legal development. The Karnataka High Court has stayed a Rs 378-crore tax order against the company on charges of non-payment of IGST.

Kotak Institutional Equities has upgraded the rating on LTIMindtree to 'Add' from 'Reduce', with a higher target price of Rs 6,200. The brokerage said that LTIMindtree is well set for a strong recovery in revenue growth over the next couple of years, led by healthy BFS spending, starting from a trough in FY24.

The brokerage said in its note, "We raise our FY25-27E US dollar revenue estimates by 0.5-1 per cent each which roughly equates to a similar increase in our EPS estimates. We value the stock at 28x September 2026E earnings (against 26x earlier) at FV of Rs 6,200 against Rs 5,500 earlier." Kotak has reiterated that LTIMindtree can be a decent long-term investee underpinned by a strong and steady EPS growth trajectory.

Kotak analysts estimated that LTIMindtree dollar revenue growth would rise to 6.5 per cent in FY25 and 11 per cent in FY26 from 4.4 per cent in FY24, led by a rebound in key sectors like BFSI and hi-tech, particularly in the US, where tech spending is expected to increase.

It added that LTIMindtree would be well-placed as capital markets, risk and compliance, and core modernisation-considered fast-growing areas-heat up. The company would also be at an advantage with consolidation deals in the banking sector, including those with ABSA. Though challenges persist in the retail and manufacturing sectors, analysts said these are manageable.

Its diversified and scalable clientele across industries, coupled with the company's capability in areas such as cloud computing, ERP modernisation, data analytics, AI, SaaS, and IT operations, places the company in an enviable position to tap into several IT budgets. Kotak also highlighted that LTIMindtree does not have any BPO business that gets disrupted by generative AI. Further, the positioning of the company as a challenger vendor increasingly resonates with a market which is showing rising acceptance for niche providers.

Off late, the company has seen a slowdown in senior management attrition, but the demand for talent is so hot that the departures could keep coming. Kotak said a stable leadership team is needed to achieve revenue synergies from the merger announced recently and added that the current team remains strong.

Updated 14:15 IST, August 28th 2024

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