Kotak Institutional Equities has reduced its target price for LTIMindtree and maintains a ‘Reduce’ rating. The company continues to face challenges due to frequent exits of senior management personnel, integration difficulties, weak demand, and risks related to specific clients. These factors cloud the company’s near-term growth prospects.
The brokerage firm highlighted the departure of several senior executives from LTIMindtree in the past year, which it believes is due to a lenient approach during the merger process. This situation has led to instability and hindered the focus on revenue growth and realizing merger benefits.
Despite this, Kotak Equities acknowledges the strength of LTIMindtree’s management team, which comprises experienced individuals with a proven track record in leading business units.
Weak spending conditions further contribute to near-term risks, leading to a revision of growth estimates for the company. Revenue growth estimates for FY25 and FY26 have been lowered, along with the FY26 EBIT margin.
Key challenges include subdued discretionary spending in 2024, client restructuring impacting project flow, and delayed benefits from cost-saving initiatives.
The current valuation of LTIMindtree does not adequately account for integration and demand risks. A potential 10% correction in the stock price could make it more appealing.
Given these factors, Kotak Equities maintains a ‘Reduce’ rating on LTIMindtree and has revised the target price to ₹5,375 per share.
The company’s shares have experienced a decline in 2024 but have shown positive returns over the past year. As of 9:30 am, LTIMindtree shares were trading at ₹5,153.85 on the BSE.
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