Emkay Global Financial has given Hold recommendation for Larsen and Toubro Infotech with a target price of Rs. 6400 in its research report issued on Oct 19, 2021
Emkay Global Financial’s report on Larsen and Toubro Infotech
LTI’s revenues grew 8.3% QoQ to USD509.0mn (CC: 8.9%), above our estimate. EBITM expanded by 80bps QoQ to 17.2% on the back of strong revenue growth, SG&A leverage and offshore shift, partly negated by supply-side inflation and lower utilization. Revenue growth was broad-based and driven by Manufacturing (12.9% QoQ CC), BFS (10.6%), Insurance (6.1%), High-tech, Media & Entertainment (7.0% QoQ CC), and ENU (6.9%). All geographies reported over 5% QoQ CC growth, led by North America and RoW. Management is confident of top-quartile revenue performance and expects at least USD2bn revenue in FY22 on strong demand and good progress on client mining. LTI signed a USD30mn TCV deal in Europe in Q2. It expects better large deal closures in H2.
We raise our FY22E/FY23E/FY24E EPS by 2.7%/4.9%/4.7%, factoring in Q2 performance. We expect LTI to deliver top-quartile revenue/earnings performance over FY21-24E. We retain Hold with a revised TP of Rs6,400 at 37x Sep’23E EPS (earlier 30x), considering the rich valuation.