Emkay Global Financial has given Hold recommendation for Larsen and Toubro Infotech with a target price of Rs. 4500 in its research report issued on Oct 15, 2022
Emkay Global Financial’s research report on Larsen and Toubro Infotech
LTI’s Q2 operating performance was mixed with revenue exceeding, albeit margins missing, our expectations. LTI is confident about delivering top-quartile revenue growth performance in FY23, on a healthy H1, anticipated seasonal growthacceleration in H2, large deal intake & pipeline (4 large deals in Q2 with TCV of USD80mn; ~USD2bn pipeline), and steady progress on client mining. The company has not seen any project cancellations so far, but has experienced some delay in decisionmaking. Clients are concerned about high inflation and macro uncertainties; however, such concerns have not yet translated into lower spending. LTI has a good balance of efficiency and growth/transformation stack of offerings, granting it confidence to sustain the deal-win momentum in the face of macro playing out on either front. We raise our EPS by 0.9-1.7% for FY23E-25E, factoring-in the Q2 performance.
Outlook
We remain positive on the mid-to-long term growth prospects of the LTI-MTCL combined business and benefits from merger synergies; but current valuation offers limited upside. We maintain HOLD with TP of Rs4,500/share at 23x Sep-24E EPS (earlier Rs4,450/share).