Capital market rating of 49/100 for L&T Technology Services Ltd implies a Subscribe rating.
Valuation
For the quarter ended June 2016, consolidated net sales (as per old accounting standards) stood at Rs 802.88 crore. The OPM stood at 19.3% and OP at Rs 155 crore. After providing total tax of Rs 43.49 crore, consolidated PAT for the June 2016 quarter stood at Rs 123.68 crore. As per new accounting standards (Ind AS), consolidated sales are higher by 13% to Rs 802.88 crore and net profit is higher by 23% to Rs 108.31 crore. Notably consolidated net profit as per the new accounting standards, is 12% lower than net profit as per old accounting standards.
For FY 2016, consolidated net sales (as per old accounting standards) stood at Rs 3066.51 crore, up by 17% YoY. The OPM went up 180 basis points to 17%, resulting in a 31% increase in OP to Rs 520.43 crore. Higher foreign exchange gain resulted in other income being up by 202% to Rs 76.22 crore. PBT stood at Rs 535.24 crore, up by 44%. After providing total tax of Rs 118.59 crore, up by 94%, consolidated PAT for the year ended FY 2016 stood at Rs 416.65 crore, up by 34%. On equity share capital of the company of Rs 20.34 crore of face value of Rs 2 each, the EPS for FY 2016 works out to Rs 41.
At higher price band of Rs 860, LTTS is being offered at a P/E of 21 times its FY 2016 earnings.
Tata Elxsi and Cyient are its listed comparable peers. For FY 2016, Tata Elxsi reported consolidated sales of Rs 1075.21 crore (up 27%) and PAT of Rs 154.81 crore (up 52%), with an EPS of Rs 49.7. At the current market price of around Rs 1530, the scrip is trading at P/E of around 30.7 times its FY 2016 consolidated earnings. Cyient, based on its consolidated FY 2016 EPS of Rs 29.7 (net profit down 8% over FY 2015) and the current market price of around Rs 466, is trading at P/E of around 15.8 times.
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