L&T Technology Services Ltd. share price target

L&T Technology Services’ (LTTS) Q2FY23 revenue growth at 4.5% QoQ CC beat our estimate of 4%.

LTTS reported a 3.6% QoQ CC growth in 4QFY22, 90bp below our estimate due to softer growth in Industrial Products (-0.5% QoQ), Medical Devices (flat QoQ), and Telecom and Hi-Tech (+1.1% QoQ), while Transportation grew a robust 7.8% QoQ. Despite the large 400bp shift in its on-site revenue mix and lower utilization (-80bp QoQ), operating margin was flat QoQ. Attrition spiked to 20.4% (+290bp QoQ) in 4QFY22, indicating continued supply pressures. The company bagged its second over USD100m deal (after winning a historical first in Dec'21) from Jaunt Air Mobility in the Aerospace...

estimates. We assume ~18% margins in FY23 & FY24. FY23 USD revenue growth guidance of 13.5-15.5% YoY USD appears to be conservative given pickup in large deal wins especially in EACV segment in FY22 and all-time large deal pipeline. However, given possibility of moderation in ER&D spends due to macro uncertainties, guidance may not be upgraded by same level as it was done in FY22 (upgraded from 13-15% to 19-20%). Management targets to maintain 18%+ EBIT margin factoring in headwinds from intermittent wage hikes, travel costs, high admin expenses...

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. Deal traction was healthy with total 9 deals, 5 of these with TCV of USD10 million plus, which includes 2 USD25 million plus deals. Given strong demand momentum management has increased USD revenue growth guidance to 1920% from earlier 15-17% (previously 13-15%). Revenue guidance implies 3.54% sequential growth in Q3 and Q4. Management mentioned that they are...

L&T; Technology Services (LTTS) reported 6% QoQ CC growth in 2QFY22, above our estimate of 5% QoQ CC, led by a broad-based performance across verticals. Operating leverage led to EBIT margin improvement of 110bp QoQ to 18.4% (above our estimate of 16.8%), despite strong employee additions (+6% QoQ) and lower utilization (-110bps). It reported better-than-expected attrition of 16.5% (+200bps QoQ). The 350bps increase in the FY22E USD revenue growth guidance to 1920% (v/s 1517% in 1Q) came as a welcome surprise. While we were anticipating...

We recommend a HOLD and assign a 35x P/E multiple to its FY23E earnings of Rs 124/share, which gives a TP of Rs 4,290/share indicating potential upside of 6%.

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 Margin guidance of 18% by FY25 is much above our expectations (~16.5%) insights into company's' growth strategies and changing industry landscape....