Prabhudas Lilladher has given Buy recommendation for L&T Technology Services with a target price of Rs. 5621 in its research report issued on Oct 20, 2021
Prabhudas Lilladher’s research report on L&T Technology Services
LTTS reported strong revenue growth of +5.7% QoQ USD, above our & cons estimates (Ple: 5%, Cons:3%). Growth was led by Industrial Products (+8.6% QoQ USD), Transportation (+6.2% QoQ USD) and strong recovery in Medical devices segment (+9.6% QoQ) after soft performance in last 2 quarters. Consistent improvement in EBIT margin for five consecutive quarters led to highest ever margin of 18.4% +116bps QoQ (Ple: 17.3%, Cons: 17%) despite high supply side cost pressures, driven by productivity gains and revenue growth leverage. We believe that margins may not sustain at these levels and will come back to ~17.3% in 2HFY22 given headwinds from rising attrition, probable wage hike and come-back of travel and facility costs.
We arrive at DCF based TP of INR 5621 (implied target multiple of 44x P/E on FY24 EPS). LTTS is currently trading at 46x/40x on FY23/24 earnings of INR 111/128 respectively with Revenue/EPS CAGR of 19%/23% over FY22-24E.