ICICI Securities has increased its price target for LTIMindtree to ₹3,520, though it maintains a 'Reduce' rating. The brokerage highlights strong execution in AI revenue scaling, which now contributes 12% to the total, but remains cautious about the company achieving its 6-8% organic growth target in a weak economic environment.
ICICI Securities has released an updated research report on LTIMindtree, adjusting its price target to ₹3,520 from the previous ₹3,260. Despite this upward revision, the brokerage retains a 'Reduce' rating on the stock, citing significant hurdles in hitting projected revenue growth targets. The new valuation is based on a Price-to-Earnings multiple of 16x, applied to the firm's estimated earnings per share for fiscal year 2028.
Operational Strengths in AI and Key Accounts
The brokerage report notes that LTIMindtree has demonstrated effective operational management, particularly in the artificial intelligence segment. AI-related revenue has reached a quarterly run-rate of $150 million, representing roughly 12% of the company's total revenue. Additionally, the company recorded growth in its top-tier client accounts, with revenue from its top five clients rising by 4.5% in dollar terms, while the top six to ten clients saw a 3.8% increase quarter-on-quarter. These gains have been supported by improved productivity levels. In the first quarter of fiscal year 2027, the company managed to expand its profit margins despite the combined pressures of increased employee wages and slow overall revenue growth.
Challenges in Meeting Annual Growth Targets
While management expects revenue performance to improve in the second quarter of fiscal year 2027, the path to meeting full-year goals remains demanding. LTIMindtree has reaffirmed its guidance for organic revenue growth between 6% and 8% in dollar terms for fiscal year 2027. To hit these figures, the company requires a quarter-on-quarter revenue growth rate of more than 2% for the remainder of the year. ICICI Securities expressed skepticism regarding this trajectory, pointing to the combination of reduced discretionary spending by international clients and broader deflationary pressures stemming from the rapid adoption of AI technologies, which can shift pricing models for IT services providers.
Investors may monitor the company’s ability to sustain margin expansion and secure large deals that justify the required quarterly revenue growth rate. The effectiveness of the company’s strategy to balance wage costs against client budget constraints will be an important factor for its near-term financial performance. The next key update to track will be the reported revenue growth for the second quarter of fiscal year 2027 to see if it aligns with the necessary 2% quarterly ask-rate.