LTIMindtree Limited is an Indian multinational information technology services and consulting company based in Mumbai. A subsidiary of Larsen & Toubro, the company was incorporated in 1996 and employs more than 90,000 people.
Mindtree which was the other IT services subsidiary of Larsen & Toubro, was merged into LTI in November 2022, and the company was renamed as LTIMindtree. After the merger, LTIMindtree became India’s fifth largest provider of IT services by market capitalisation and sixth largest by revenue.
Investors are afraid that LTIMindtree as a merged entity would have high attrition as the attrition rate was at an all-time high in the industry. An economic slowdown and a decline in the company’s net profit in December 2022 quarter have made an impact LTIMindtree share price to fall by over 20% in the past one year and 25% from its 52-week high.
LTIMindtree has strong fundamentals. Considering the 5-year historical data, the revenue of the company has risen at a CAGR of 16%, which has been supported by increased digitisation. The net profit has risen by a CAGR of 15.5%. The 5-year average RoE and RoCE are computed with a high number at 28.4% and 38.5% respectively. The company pays dividends consistently and has a 5-year average dividend payout of 36% and a dividend yield of 1.54%.
Considering the emerging technologies and the increasing requirements for digitisation, the IT industry is a fantastic long-term investment. The recent correction in IT stocks is giving us a great investment opportunity for the long-term perspective.
Due to the high interest rates, the Indian rupee might further weaken against the dollar which is beneficial for the IT stocks. The impact of recession in the US has made most of the impact already on the Indian IT stocks.
Majority of the IT stock prices have declined by 30-40% from their lifetime highs which were made in 2022 and currently provide a good risk reward ratio based upon valuations.
LTIM stock price has taken strong support on the 61.8% retracement level and the price receives major support on the 50% retracement level. Considering the price is near the 100-day exponential moving average, this stock is relatively oversold. The price at current level is a good opportunity, however investors may place trigger orders to buy this stock around the Rs 4000 level.
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