Dolat Capital Market's research report on Larsen and Toubro Technology
LTI reported revenue growth of 2.3% QoQ in CC terms (DE: 1.8%) led by strong performance in BFS vertical (9.5% QoQ). OPM improved by 250bps to 19.9% (DE: 17.9%) led by sustainable improvement in off-shore mix (170bps QoQ) and higher utilization (110bps QoQ). Announced Dividend of Rs. 15 per share. LTI guided growth to be in top quadrant for FY21 along with revenue reaching to Q4FY20 levels by Q3FY21 (implies atleast ~4% QoQ growth). This is largely led by the strong pipeline (up 22% YoY) despite modest Net New TCV of $40mn in Q2; as large deal closure taking time. LTI reinstated the PAT Margin guidance at 14-15% despite H1 PAT Margins at ~14.7% and upcoming salary hike in Q4. Expects offshore leverage to sustain as most new deals are at ~99% offshore mix.
Outlook
We remain confident that LTI should continue its industry leading performance over next few years with a very-stable Net profitability (reinvest Fx/realization gains back into business). We have factored in a 14% revenue/earnings CAGR over FY20-23E with an Accumulate rating and TP of Rs. 3,250, valuing it at 25x FY23E EPS of Rs.130.
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