LTIMindtree shares declined more than 5% on October 18, a day after the IT services firm reported its earnings for the July to September 2024 period, which were largely in line with CNBC-TV18 poll estimates. Despite acknowledging strong deal wins, brokerage firms are divided on the Mumbai-based IT services provider.

Morgan Stanley is of the view that a lack of positive surprises in the second quarter and softer-than-expected commentary for the third quarter could drive near-term stock weakness.

However, broader recovery trends are intact with BFSI momentum sustaining, a large deal pipeline, and strong headcount additions, the brokerage said, adding that it would use any weakness to accumulate the IT stock.

Morgan Stanley has given LTIMindtree shares an overweight rating and set the target price at ₹7,050, implying it sees a potential upside of more than 10% from the closing price of October 17.

Also Read: LTIMindtree Q2 Results: Net profit climbs 7.7% to ₹1,251 cr, announces ₹20 interim dividend

Nomura, on the other hand, has given the tech stock a ‘reduce’ call and set the target price at ₹5,140, which means it expects it to fall almost 20% from yesterday’s closing level.

It said that the near-term growth visibility is driven by short-cycle projects from clients and that margin recovery would be slow. The brokerage added that significant improvement needs a sharp growth revival for the firm.

Nomura has lowered its FY25-27 earnings per share (EPS) estimate by 3-5%, respectively, citing strong large-size deal wins and higher-than-expected margin expansion as upside risks.

Citi, meanwhile, noted that while LTIMindtree is executing reasonably well in a tough macro environment, it finds Street expectations too optimistic.

It said among the forward-looking indicators were — steady deal total contract value (TCV) at $1.3 billion, which is up 5% yoy on an LTM basis; a 1% rise in headcount; and a “cautiously optimistic” management commentary.

The brokerage also highlighted that the third quarter will witness wage hikes that could have an impact of 200 basis points on the margin, which could likely partly be offset by growth and pyramid.

Nuvama called Q2 a second consecutive quarter of strong performance and maintained its buy rating on LTIMindtree shares, with a target price of ₹7,550, implying a potential upside of 18% in the stock.

However, it expects seasonality to play out in the third quarter with headwinds including furloughs and fewer billing days.

“LTIM shall be rolling out its annual wage hike in Q3 and Q4, which is expected to hurt margins by 200bp, although this shall be partially offset by continued operational efficiency measures. LTIM added 2.5k+ employees in Q2, including 1100 freshers while utilisation was down 60bp QoQ to 87.7%,” it added.

LTIMindtree shares traded 5.6% lower at ₹6,041.20 on NSE at 10:14 am.

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