Prabhudas Lilladher has given Buy recommendation for Larsen and Toubro Infotech with a target price of Rs. 6369 in its research report issued on Apr 20, 2022

Prabhudas Lilladher’s research report on Larsen and Toubro Infotech

LTI reported a miss in revenue growth (3.1% QoQ USD in Q4), partly due to lower onsite volume (-0.4% QoQ USD) impacted by high onsite attrition. However, we expect revenue momentum to continue (~19% YoY in FY23E) in the near term given – 1) 4 large deals with TCV $80mn+ won in Q4, 2) deal pipeline at ~$2bn with 50% deals in late stage including 4 deals in contracting stage and 3) significant client mining opportunities from 100 new logo additions in FY22. Management cautiously monitors impact of ongoing macro uncertainties and high inflation. It retained 14-15% PAT margin guidance, however margin headwinds from 1) wage hike in Q1FY23 (~290bps impact), 2) increased investments in sales and 3) return of travel and facility costs may further weigh it down.

Outlook

We cut EPS estimates by 8%/5.5% for FY23/24E led by cut in margins by ~111bps/50bps in FY23/24 and cut in revenue by ~3%. We arrive at DCF based TP of Rs. 6369 (earlier Rs. 7166) with implied target multiple of 36x P/E on FY24 EPS (earlier: 39x) led by increase in risk free rate and moderation in long term growth rates and margins. LTI is currently trading at 37x/31x earnings multiple on EPS of 147.3/175.5 for FY23/24E with Revenue/EPS CAGR of 17%/16% over FY22-24E.

More Info

At 14:20 hrs Larsen & Toubro Infotech was quoting at Rs 5,123.75, down Rs 362.40, or 6.61 percent.

It has touched an intraday high of Rs 5,465.00 and an intraday low of Rs 5,106.30.

It was trading with volumes of 90,117 shares, compared to its thirty day average of 16,417 shares, an increase of 448.92 percent.

In the previous trading session, the share closed down 6.49 percent or Rs 380.50 at Rs 5,486.15.

The share touched its 52-week high Rs 7,595.25 and 52-week low Rs 3,525.95 on 04 January, 2022 and 17 May, 2021, respectively.

Currently, it is trading 32.54 percent below its 52-week high and 45.32 percent above its 52-week low.

Market capitalisation stands at Rs 89,820.44 crore.

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