LTIMindtree is the top pick of Motilal Oswal for 2025. The brokerage firm is betting on this IT share on many aspects. However, the two key focus areas include the BFSI and hi-tech verticals, which Motilal Oswal expects to rebound and give an “asymmetric return” in the next 12-18 months. This is combined with the company’s strong capabilities in data, ERP, and application modernization. This positions it well to capture increasing demand in these areas. LTIM’s focus on AI aligns with client investments in next-gen transformations.
The Noida-based IT services company’s substantial portion of revenue comes from the BFSI segment, which is 35%. While the hi-tech vertical, which derives 25% of revenue, is favourably positioned for growth, said Motilal Oswal. “We anticipate these two verticals to be the fastest-growing over CY25, providing a significant opportunity for LTIM to capitalize on their expansion.”
Further, it said that the chosen one will grow due to recovery in discretionary spending and modernisation initiatives along with its expertise in governance and regulatory compliance deals. However, LTIMindtree is a bit cautious about improvement in the environment of discretionary spending.
Moving ahead, there are uncertainties regarding LTIMindtree’s management succession and near-term margin challenges. However, a significant margin recovery is expected by FY27 along with clarity in leadership by the first half of CY25. The current valuation stands at 27x FY27E earnings per share (EPS).
The brokerage firm views the stock as not in demand as it still trades near its 5-year average price-to-earning multiple.
“While valuations reflect uncertainty around the current management and margin headwinds, we see multiple levers for a potential re-rating,” wrote Motilal Oswal in its research note.
Margins remain a key monitorable and the biggest risk to the thesis of the brokerage firm. As post-merger synergies have not been realised to the extent previously anticipated, a challenging demand environment has made it tougher to expand margins. However, a recovery in growth and a strong dollar could provide a margin cushion in FY26 and FY27.
Motilal Oswal believes LTIM to “Outperform” its large-cap peers and expects low double-digit constant currency growth for FY26. LTIM might have handled its overall churn rate more efficiently after the acquisition. However, it expects the overall attrition rate may stay low in the future. Additionally, margins are still a worry and represent the primary risk to the brokerage’s perspective.
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