Prabhudas Lilladher has given Buy recommendation for Larsen and Toubro Technology Services with a target price of Rs. 4791 in its research report issued on Sep 03, 2021

Prabhudas Lilladher’s research report on Larsen and Toubro Technology Services

We attended LTTS investor and analyst meet in which management gave insights into company’s’ growth strategies and changing industry landscape. Management aims to reach US$ 1.5 Bn annualized revenue run-rate by Q4FY25 and US$ 1 Bn by Q2/Q3FY23 implying ~18% growth over FY21-25E. Strong guidance till FY25 reinforces our belief in sustenance of strong demand tailwinds for next 3-5 years. We believe that the guidance is achievable given 1) strong broad-based ER&D spending and expansion in addressable market size, 2) LTTS’s focused bets on 6 strategic high growth areas, 3) increasing share of software and technology as compared to hardware in ER&D spends, and 4) investments in sales, large deals and talent pool.


We anticipate 18% revenue CAGR over FY21-25E and margins to improve from 17.3% in FY22E to 18% in FY25E. We value LTTS based on DCF valuation (risk free rate at 6.2%, equity risk premium at 5.7% & terminal growth rate at 7.5%) to arrive at TP of INR 4,791 (earlier: 4018). LTTS is currently trading at 51.8x/40.5x on FY22/23 earnings of INR 83.8/107.2 respectively with Revenue/EPS CAGR of 18%/30% over FY21-23.

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