Prabhudas Lilladher has given Buy recommendation for Larsen and Toubro Infotech with a target price of Rs. 7503 in its research report issued on Jan 20, 2022

Prabhudas Lilladher’s research report on Larsen and Toubro Infotech

LTI reported revenue growth of 9.2% QoQ CC, +8.7% QoQ $ slightly above our estimates. (Ple: 8%). This is second consecutive quarter of greater than 8% sequential growth. Growth was led by Manufacturing (+18.3% QoQ USD) and BFS (+9.7% QoQ USD) which together contributed 69% of incremental revenue. Growth in manufacturing was aided by higher pass through revenue in India business (contributing 2% QoQ to growth). LTI added 27 new logos this quarter including one G-500 logo taking the G500 client count to 72 on YTD basis. LTI opened a marquee new logo in Pharma vertical in North America with deal TCV of USD 32 mn and headroom for further wallet share expansion within this client. LTI won this deal against two largest companies in IT sector indicating that clients now value ability to provide customized solutions and speed of execution rather than scale.

Outlook

Our EPS estimates increase by 1.7%/3.4% for FY23/24E led by increase in revenue growth estimates. We arrive at DCF based TP of Rs. 7503 from earlier Rs. 7239 (implied target multiple of 39x P/E on FY24 EPS). LTI is currently trading at 41/35x earnings multiple on EPS of 164.6/191.7 for FY23/24E with Revenue/EPS CAGR of 20%/21% over FY22-24E. LTI continues to remain one of our preferred pick in midcap IT space.

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