Domestic brokerage and research firm ICICI Securities has suggested that the merged entity of Larsen & Toubro Infotech and Mindtree (LTIIndustry) could see an upside of 24 per cent from current levels in one year.
“We continue to value LTIM at 25x FY26 EPS 253 (1-year discount with WACC of 12 percent) to reach its 12-month target price 5,651, 24 per cent potential upside,” the brokerage said, adding Mindtree Remains top pick in the sector.
The brokerage continues to post a revenue CAGR of USD 14.5 per cent over FY 23-26E, given strong crosssell/up-sell opportunities, ability to participate in larger deals post mergers and hyperscaler and SaaS partnership-led sales Strength in
ICICI Securities expects EBIT margin to improve by 260 basis points over FY23-FY26, in line with management guidance to expand margin to 19-20 per cent by FY27, driven by operations and integration Synergy around both due to respective high degree of operating leverage staff cost And SG&A is poised for 20 per cent EPS CAGR in FY23-26, the highest in their coverage universe.
Analyst maintains ‘Buy’ rating
Maintaining ‘Buy’ rating, the brokerage said, “We see strong management performance track-record in the past in both Mindtree and LTI, which will form the base for LTIM to ensure industry-leading profitable growth in the years to come. “
LTIMindtree’s management reiterated its aspiration to drive $1 billion of incremental revenue through cross-sell synergies over the next two to four years and reach 19-20 per cent EBIT margin by FY27, i.e. pro-forma margin of the combined entity But an improvement of 200 bps. FY22.
“Mindtree is strong in front-end digital solutions and LTI is strong in back-end ERP related core transformation solutions,” the note said.
Leveraging the complimentary service line expertise of LTI and Mindtree, LTIM aims to achieve revenue synergies through cross-sell/up-sell opportunities across its existing 374 client accounts of over $1 million in revenue size. For the same, it is investing in strengthening service line sales leadership and capabilities.
Highlights of LTIM Investor Day 2023,
– No material impact on BFSI vertical due to SVB crisis
Management expects EBIT margin to improve to 19-20% by FY27
– LTIM with flexible bluechip account portfolio
– Huge cross sell/upsell potential
– Strong partnership led sales engine
Combined entity LTIM has high opportunities for larger deals
– Capital allocation framework and ROCE target
Quoting LTI Mindtree Ltd. 4,614.35, up 1.04 per cent, at 12:41 pm on the NSE.
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