LTI stock fell 1.6% as management was cautious of near-term, supply-side pressures

Sharing its growth plan, management aims to boost its revenue by mining existing customers and investing in new high potential verticals and markets, among other measures. Management said demand remained strong across verticals, markets and service lines with a new large deal pipeline of US$2.07 billion, a 9% year-over-year (YoY) growth. Management said demand is shifting to medium-sized short cycle deals, driven by discretionary spending. Further, LTI retained its margin guidance at 14-15% and said that the company continues to focus on reinvestment to capture incremental market share rather than increase margins. “We see this as an indication of the company’s willingness to tolerate pricing pressure, contrary to peer commentary on the price hike,” analysts at Motilal Oswal Financial Services Ltd said in a report.

While the demand outlook remains strong, the talent crunch is still a pain point for the sector and the company. It should be noted that despite massive hiring in the recent quarters, the company’s management cautioned that the supply side is a near-term concern and expects the situation to ease in the next four-six quarters. This could be one of the reasons why the company’s shares fell around 1.6% on the NSE in early trade on Friday.

Meanwhile, in the last year, the LTI stock price has nearly doubled with almost 99% returns, comfortably outperforming the Nifty IT index, which is up around 57% in the same period. Analysts say the sharp rally in the stock has mostly drawn positives and has led to sharp valuation re-ratings. At one-year forward price-to-earnings, LTI stock is trading at a multiple of about 45 times. The stock is much more expensive than some of the largecap technology peers like Tata Consultancy Services Ltd.