LTIMindtree shares jump 5% post Q2; here’s why

LTIMindtree, the merged entity of Larsen & Toubro Infotech (LTI) and Mindtree, surged nearly 5% in opening trade on Thursday as investors reacted positively to its second quarter earnings report. The net profit of the L&T group company was hit by a sharp decline in operating profit margin due to increase in employee costs amid wage hikes rolled from July 1, 2023. However, the total revenue rose over 8% despite adverse economic environment and the company also declared an interim dividend of ₹20 per equity share.

Reacting to Q2 earnings, LTIMindtree shares gained as much as 4.8% to ₹5,405, while the market capitalisation surged to ₹1.60 lakh crore. Early today, the IT stock opened higher at ₹5,191.05, up 0.7% against the previous closing price of ₹5,156.90 on the BSE.

At the day’s high levels, shares of LTIMindtree trade 3.3% lower than its 52-week high of ₹5,590 touched on September 14, 2023. It hit a 52-week low of ₹4,120 on January 23, 2023. In the last one year, the counter has given 8.5% returns to its shareholders and 29% in six month period. The largecap stock shed over 1% in a month, whereas it gained nearly 4% in a week.

For the July-September quarter of the current fiscal, LTIMindtree reported consolidated net profit of ₹1,162.3 crore, down 2.2% as compared to ₹1,189 crore in the year-ago quarter. Sequentially, the profit grew 0.9% from ₹1,152.3 crore in June quarter of the current fiscal (Q1 FY24).

The overall revenue of the country's fifth biggest IT services company in terms of m-cap climbed 8.2% to ₹8,905 crore in Q2 FY24, from ₹8,228 crore in the corresponding period last year. On quarter-on-quarter (QoQ), the revenue rose 2.3% from 8,702 crore in Q1 FY24.

On the operational front, EBITDA dropped 0.3% YoY and QoQ to ₹1,631.3 crore, while margin slides to 18.3% from 19.9% in Q2 FY23 and 18.8% in Q1 FY24. The operating profit margin (EBIT) dipped to 16% from 17.5% in the same period last year and 16.7% in the June quarter of FY24.

In dollar terms, LTIMindtree’s profit declined 5% YoY to $140.4 million, while revenue grew 5.2% YoY to $1,075.5 million.

“Our results in the second quarter were highlighted by strong revenue growth of 5.2% YoY, in USD terms, along with a healthy operating margin of 16% despite wage hikes across the organisation. This all-round performance, in a challenging business environment, demonstrates the strength of our capabilities and disciplined execution,” says -Debashis Chatterjee, Chief Executive Officer and Managing Director.

“Our robust order inflow at $1.3 billion, representing a 20% increase YoY, and growth across our client bands speaks to the strength of our client relationships, robust delivery and our ability to address the priorities of our clients across their efficiency and transformation mandates,” he adds.

As of September 30, 2023, LTIMindtree had 737 active clients, with 90 of them were $10 million plus, 41 were $20 million+, and 14 were $50 million+.

The total headcount stood at 83,532 professionals as of September 30, 2023, while the trailing 12 months attrition was 15.2%.

The board of LTIMindtree also declared an interim dividend of ₹20 per equity share of ₹1 each. The interim dividend will be paid within 30 days of declaration to eligible shareholders whose name will appear in the register of members or in the list of beneficial owners provided by the depositories as on ‘Record Date’, October 27, 2023.

In the past 12 months, the company declared an equity dividend amounting to ₹60 per share. At the current share price, the dividend yield stands at 1.16%.

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