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Here’s why LTIMindtree should be on investors radar in 2023

market | Jan 25, 2023 4:18 PM IST

Here’s why LTIMindtree should be on investors radar in 2023

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The year 2022 saw the merger of two solid midcap IT companies L&T Infotech (LTI) and Mindtree -both individually growing faster than the industry. 2023 will be the first full year of combined operations, as a merged entity.

The year 2022 saw the merger of two solid midcap IT companies L&T Infotech (LTI) and Mindtree -both individually growing faster than the industry. 2023 will be the first full year of combined operations, as a merged entity.

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LTIMindtree - is India’s sixth largest IT company with annualised revenue of nearly $4.2 billion. It trails TCS, Infosys, HCL Tech, Wipro and Tech Mahindra.
But despite LTIMindtree being 40 percent smaller than Tech Mahindra, it has a diversified portfolio with presence across geographies and verticals, unlike Tech Mahindra which has a portfolio tilted towards communications or telecom.
LTIMindtree will now be bigger in size, and that could help in vendor consolidation deals and also allow it to compete with Indian tier-1 companies for large deals.
The company has outlined synergies over the next 4-5 years. Management expects revenue synergies of $1 billion and margin improvement of 200 bps which will come by way of efficiencies etc.
The company also has cash of over $1 billion which it can use to engage in opportunistic acquisition opportunities over the medium term.
But what about the risks?
The first quarter of operations together was a bit shaky. The company missed the mark on revenue and margin, impacted by higher furloughs and integration costs. There are bound to be senior-level exits as well.
Finally valuation is not cheap. The stock trades at 23-24 times FY24e price to earnings.
Brokerage firm CLSA has a outperform rating on the stock with target price of Rs 4,920. However Jefferies and JPMorgan have an underperform and underweight stance with target price of Rs 3,700 respectively.
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