LTIMINDTREE: DECENT PERFORMANCE; MARGINS TO REMAIN RANGE BOUND UNTIL GROWTH PICKS UP

News: LTIM reported revenue of US$ 1,096.2 mn, up 2.5% QoQ/ 3.5% YoY (up 2.6% QoQ/ 3.7% YoY in CC terms) while in rupee terms the revenue came at ₹ 9,142.6 crore, up 2.8% QoQ/5.1% YoY. Segment wise Hitech (25.6% of mix), BFSI (35.2% of mix) & Manufacturing (18.5% of mix) grew by 8%, 2.8% & 2% QoQ while Health (6.2% of mix) & Retail (14.5% of mix) declined by 7.9% & 1.6% respectively. Geography wise on a QoQ basis North America (75.1% of mix) & Europe (14.4% of mix) expanded by 4.3% & 1.1% while ROW (10.5% of mix) de-grew by 7.2%. EBIT margin of the company increased by ~30 bps QoQ due to the tailwinds from absence of -80 bps impact of cancellation of 2 projects project cancellations from the last quarter & operational efficiencies which were partially offset by headwinds from higher visa costs (50 bps) and higher SG&A expenses on account of travel & marketing events. The company during the quarter won TCV of US$ 1.4 bn, flat QoQ. The company’s net employees during the quarter increased by 284 to 81,934 while attrition was flat QoQ at 14.4%.

Views: LTIMindtree had a decent performance in Q1FY25 with uptick in both revenue & margins as deals which were closed/paused in prior periods finally ramped up in this quarter. The management highlighted that there was no change in the demand environment as clients continue to focus on cost takeout and vendor consolidation deals. However, there is momentum gain in high priority transformational projects, especially in the BFSI segment (without discretionary spend uptick) as well as in AI deals wherein clients are looking to scaling up from POCs. The company indicated that it is planning to roll out wage hikes in H2FY25 which would impact the margins a little. The company’s deal wins remain flat, but a lot of MSAs are signed and many deals remain on the cusp of being closed in Q2, providing some revenue visibility for and beyond Q2. The management reiterated that medium term aspiration of margin expansion to 17-18% is pushed forward and shall be achieved once revenue growth kicks in.

Impact: Neutral