LTIMindtree Ltd. will be the fastest-growing listed Indian IT company with a market cap of $10-50 billion driven by strong sales, according to CLSA.
The brokerage initiated coverage on the IT company with an “outperform” rating and a target price of Rs 4,920 apiece implying an upside of 11%, as its revenue growth and return ratios are high. The relatively lower institutional holding is an added support, CLSA said.
“We believe the scale of the merged entity elevates it into the $10-50 billion (Rs 82,476 crore to Rs 4.12 lakh crore) market-cap group where investors should be evaluating it along with Wipro Ltd., HCL Technologies Ltd., and Tech Mahindra Ltd.,” the brokerage said in its investor note.
CLSA expects the merged entity of Larsen & Toubro Group to deliver the highest revenue growth, aided by increased participation in large deals. It predicted a 13.5% dollar revenue CAGR for the company as against a 9-11% for its peers.
CLSA also expects LTIMindtree to report better margins than its competitors, even without the potential scale leverage that would likely be re-invested to boost revenue growth.
The balance sheet is healthy, and working capital could get more efficient after the merger, according to CLSA. “We like the structural story in LTIM, but the stock’s full valuations and integration risks, besides the sectoral concerns, could limit the upside in the near term,” it said.