Sharekhan has maintained its BUY recommendation for LTIMindtree Limited, assigning an unchanged target price of Rs 7,500, which indicates a significant upside from the current market price of Rs 6,259. With its ambitious goal of achieving $10 billion in revenues, LTIMindtree is strategically leveraging advanced technologies, marquee client relationships, and operational efficiencies. The company’s Project North Star is expected to bolster margins, while a robust deal pipeline solidifies its growth trajectory. This report provides a detailed analysis of the company’s performance, valuation, and growth potential, along with actionable insights for investors.

Strategic Growth Objectives Highlight LTIMindtree’s Aspirations

1. $10 Billion Revenue Target:

LTIMindtree aims to grow from its current $4.3 billion revenue to $10 billion.
Key growth drivers include its focus on scaled verticals such as BFSI (Banking, Financial Services, and Insurance) and Technology, supported by partnerships with over 100 Fortune 500 companies.
2. Expanding Vertical Contributions:

The BFSI and Technology segments are expected to double in size.
Manufacturing, Healthcare, and Consumer segments are projected to triple in contribution.

AI at the Forefront of Transformation

1. Leveraging Generative AI:

AI is a pivotal element in LTIMindtree’s growth strategy, enhancing productivity and operational efficiency.
AI-driven models are aiding service transformation, talent upskilling, and the evolution of operating frameworks.
2. Expanding Market Opportunities:

LTIMindtree is capturing new enterprise spending by integrating AI to offer frictionless adoption across industries.

Project North Star: Driving Margin Expansion

1. Cost Optimization and Revenue Growth:

The company targets EBIT margins of 17-18% by focusing on revenue maximization through value-based pricing and automation.
Cost controls, including pyramid restructuring and productivity enhancements, are central to this initiative.
2. Productivity Metrics:

Utilization rates improved to 88% in H1FY25, compared to 84.5% in FY22.
Revenue per employee increased to $53,000 in H1FY25, from $48,700 in FY22.

Robust Deal Pipeline Reinforces Growth

1. Significant Large-Deal Wins:

In the last 18 months, LTIMindtree closed over 45 large deals, valued at $2 billion in total contract value (TCV).
Manufacturing (33%) and Technology (31%) dominate the deal mix, followed by BFSI (30%).
2. Large-Deal Pipeline Insights:

The current pipeline is valued at $5 billion, including 14 deals above $100 million.
Cost optimization and transformation contracts represent nearly 48% of the pipeline.

Valuation and Financial Metrics

1. Consistent Financial Performance:

FY24-27E revenue CAGR is projected at 13%, with adjusted PAT CAGR at 18%.
ROE is expected to improve from 25% in FY24 to 27.6% in FY27, underscoring operational excellence.
2. Attractive Valuation Multiples:

The stock trades at 35.6x FY25E EPS, reducing to 24.5x FY27E EPS, reflecting improved growth and profitability.

Key Risks and Market Challenges

1. Macroeconomic Headwinds:

Rupee appreciation and cross-currency movements could impact profitability.
Banking crises or a U.S. recession may moderate the pace of IT spending.
2. Competitive Landscape:

Boutique firms and GCCs pose competition in niche technology services, challenging market share.

Investor Takeaways

1. Target Price Justification:

With its strategic initiatives and promising financial metrics, LTIMindtree remains a BUY with a target price of Rs 7,500, offering substantial upside.
2. Recommended Strategy:

Accumulate at current levels for long-term gains, with a focus on tracking AI-led initiatives and deal closures.