Order pipeline to keep LTIMindtree in good books

Synopsis

LTIMindtree has seen its stock soar by 18% over the last quarter, surpassing the broader IT index. Recently reported new order bookings have exceeded market expectations, leading analysts to adjust their target prices upwards. The company has also demonstrated sequential revenue and net profit growth, alongside enhanced operating margins attributed to efficiency improvements.

The stock of LTIMindtree has gained 18% over the past three months, outperforming the 11% gain in the ET Infotech Index. The country's sixth largest software exporter based on annual revenue and fifth largest based on net profit reported robust 22% year-on-year growth in new order bookings in the September quarter. The momentum is expected to continue in the second half of the fiscal year given the pipeline of large deals. Analysts have raised the target price by around 15%.

With $1.6 billion new project contracts in the July-September period, the company's order booking crossed $1.5 billion for the fourth consecutive quarter, driven by new deals in digital transformation and artificial intelligence (AI) across major verticals.

The company has been showing slower growth in the banking, financial services, and insurance (BFSI) contributing 36% to revenue in the September quarter. It reported modest 0.2% sequential growth. The vertical's share in revenue also dropped from 37% in the June quarter. In addition, the contribution of the top five clients fell to 25.3% from 27.3% in the previous quarter. The company attributed these two trends to the recalibration of revenue from the BFSI vertical and the top five clients on account of improved productivity driven by the AI initiatives. The management considers this has a transitional phase and not a structural shift and expects to grow these accounts in future.

Revenue grew by 2.3% sequentially in the September quarter to $1,180.1 million. In rupee terms, top line grew by 5.6% from the quarter ago to ₹10.394.3 crore, the sixth consecutive quarter of growth. Revenue also crossed ₹10,000 crore for the first time. Net profit grew by 10% sequentially to ₹1,381.2 crore. The operating margin (Ebit margin) improved by 160 basis points sequentially to 15.9% in the September quarter following the company's efforts to streamline operations, absence of visa costs, and favourable currency movement. "The company's ongoing initiatives to improve efficiency, coupled with further expansion, indicate a profitability trend in the coming quarters, in spite of scheduled wage hikes in the second half of FY26," mentioned Axis Securities. The broking firm has raised the stock's target price to ₹6,250 from earlier ₹5,585.

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Elara Securities has retained an 'accumulate' rating on the stock, citing a stable management team that is focussed on growth. "We raise our earnings estimates by 4-7% during FY26 and FY27 to take into account strong first half growth in FY26 as well the future program for margin expansion," the broking firm mentioned in a report. It has raised the target price to ₹6,320 from ₹5,500. On Wednesday, the stock closed at ₹6,161 on the BSE.

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