Motilal Oswal has given Buy recommendation for larsen and toubro technology services recommended buy rating on the stock with a target price of Rs 3380 in its research with a target price of Rs. 3380 in its research report issued on Jul 15, 2021
Motilal Oswal’s research report on larsen and toubro technology services
LTTS reported a 4.3% QoQ CC growth in 1QFY22, above our estimate of 2.8%. Industrial Products/Transportation (+7.8%/+4.3% QoQ) spearheaded this growth. EBIT margin improved by 70bp QoQ, despite a wage hike during 1QFY22, aided by efficiency improvement, better utilization, and ongoing rightsizing of the workforce. The company continues to do well on the deal front, adding six large deals (over USD10m), with two having a TCV of over USD25m. The management remains extremely positive on the deal pipeline, which has seen a rise over the last two quarters, as client spends recover across both US and Europe. LTTS increased its FY22 USD revenue growth guidance to 15-17% (a 200bp increase) as it sees a significant reduction in COVID-related supply uncertainty. While we were expecting the guidance to increase, its strong 1QFY22 performance and commentary indicates that growth can significantly exceed the upper end of its revised guidance.
Our TP of INR3,380 per share implies a FY23E EPS of 31x, a premium to our target multiple for LTI on better industry and company growth. We anticipate improved industry spends compared to the preceding five years. We maintain our BUY rating.