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Reduce Larsen and Toubro Technology; target of Rs 1585: HDFC Securities

HDFC Securities recommended reduce rating on Larsen and Toubro Technology with a target price of Rs 1585 in its research report dated October 20, 2020.

October 21, 2020 / 12:10 PM IST
 
 
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HDFC Securities' research report on Larsen and Toubro Technology

We maintain REDUCE on L&T Tech (LTTS), as valuations more than adequately factor in the recovery curve. 2Q print was slightly ahead of estimates, and the growth rebound (despite 3Q furlough uncertainty) is supported by a pick-up in deal activity (deal pipeline and wins higher by ~16% over the previous quarter). While LTTS has a strong pedigree in ER&D with a well-diversified service portfolio, factors such as business cyclicality, higher discretionary nature, and slower pace of large deal conversion result in sequential volatility. The revised USD revenue guidance of -7% to -8% (-9% to -10% organic earlier) in FY21 implies +3.4 to 4.9% QoQ over 3Q-4Q and includes consolidation of Orchestra Tech (~2% QoQ in 3Q).

Outlook

Improvement in cash generation with a reduction in DSO (including unbilled) is positive. Our target price of Rs 1,585, is based on 18x Sep-22E EPS (DCF-implied at 18x and historical average at 19x).

For all recommendations report, click here

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Broker Research
first published: Oct 21, 2020 12:10 pm

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