Emkay Global Financial has given Hold recommendation for Larsen and Toubro Infotech with a target price of Rs. 6800 in its research report issued on Jan 20, 2022

Emkay Global Financial’s report on Larsen and Toubro Infotech

LTI’s Q3 operating performance beat our expectations. Revenues grew by 8.7% QoQ to USD553mn (9.2% CC), above our estimate. EBITM expanded by 70bps QoQ to 17.9% on the back of revenue growth-led operating leverage and favorable currency movement. Revenue growth was broad-based, driven by Manufacturing (19% QoQ CC), BFS (10.4%), CPG, Retail & Pharma (7.8%), E&U (7.0%), Hi-Tech, M&E (3.1%) and Insurance (2.2%). All geographies, except RoW, reported over 6% QoQ CC growth, led by India (~44% contribution to incremental revenue). Management is confident of delivering a top-quartile revenue performance in FY22 on the back of strong broad-based demand, conversations with clients, and good progress on client mining. LTI signed a USD32mn TCV deal in US (new logo in Pharma vertical) in Q3.

Outlook

We raise our FY22-24 EPS estimates by 1.0%-2.4%, factoring in the Q3 performance beat. We expect LTI to deliver a top-quartile revenue/earnings performance, but the valuation remains rich. We maintain Hold with a TP of Rs6,800 at 37x Dec’23E EPS.

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