L&T Technology Services Ltd. share price target

Despite emerging challenges in Telecom & Hi-tech vertical, LTTS is the strongest play in ER&D based on (1) Business resilience supported by vertical diversification and low client concentration (vs. peers), (2) Broad-based deal wins & deal pipeline, (3) Growth outperformance in largest vertical (Transportation) vs. peers and (4) Shift in business-mix to support margins. Expect USD rev/EPS growth of 15/17% CAGR over FY19-22E. Key risks include adverse macros (trade war) and INR appreciation. We maintain BUY on LTTS following an in-line 1Q performance. We lower est. by ~3% to factor near-term weakness in Telecom/Hi-tech vertical, however broad-based wins/pipeline provide growth visibility (continues to be industry leading). Our TP is Rs 1,955, at 20x Jun-21E EPS.

LTTS is among our top picks in tier-2 IT based on (1) Leading pure-play ER&D with diversified verticals and least client concentration, (2) High growth visibility supported by broad-based deal pipeline, deal wins and beneficiary of vendor consolidation (Transportation, Process industry), (3) Investments to drive growth in large accounts (program managers, consultant engagements, co-innovation). Expect USD rev/EPS growth at 17% each. Valuations at 18.2x FY21E supported by strong FCF generation (94% FCF/PAT), strong return metrics (35% RoIC) and growth leadership within tier-2 IT/ER&D. Key risk is Brexit/trade war repercussions. We maintain BUY on LTTS after a strong 4Q performance. Industry-leading growth in FY19 and we expect growth leadership to continue. Our TP at Rs 1,860 is based on 20x FY21E EPS.

L&T; Technology Services (LTTS) was established through a group restructuring exercise by the L&T; Group, wherein, integrated engineering services of L&T; and product engineering services business of L&T; Infotech were transferred to LTTS. As a result, LTTS has emerged as one of the leading global pure-play ER&D; services, providing services to manufacturing, technology and process engineering companies, LTTS has active presence in 10 verticals: consumer electronics, semiconductor, aerospace, medical devices, telecom, energy, construction & heavy machinery, automotive, transport, industrial Products. LTTS captures data from IoT...

Despite a significant improvement in its balance sheet, execution pick up and robust order inflows, L&T;'s P/E multiple has not changed over the last three years. We believe that this is due to persistent concerns on at least one out of the four key parameters on which investors evaluate L&T;: 1) execution pick up; 2) balance sheet/ROE; 3) order inflow momentum; and 4) margins. Although L&T; has partially delivered on strengthening its balance sheet over FY16-18, execution improvement in the core domestic infrastructure is also evident over FY18-19. To...

Maintain BUY with TP of Rs 2,030, at 22x Dec-20E. L&T; Technology Services (LTTS) reported strong revenue and operating performance, in-line with expectations and increased its FY19E rev guidance to 24% (21% earlier). A blip emerges with decline expected in a large account in FY20E. However, growth outlook is a robust mid-teens for FY20E with improvement in margins (CC terms), supported by continuity in strong deal momentum and a robust pipeline. Revenue came at USD 185.7mn, 4.8/23.0% QoQ/YoY and EBITDA% stood at 18.4%, +28bps QoQ.

Post strong performance in Q3FY19, we upgrade LTTS USD revenue growth to 24.5% (earlier 24%) for FY19E. However, we downgrade USD revenue growth for FY20E to 17% (earlier 17.8%, client specific issues) and maintain 15.9% for FY21E. Our USD/INR assumptions are at 70/70.5/72 for FY19/FY20/FY21E. We model our EBIDTA margin assumptions at 17.6/17.9/18% for FY19/FY20/21E. Our EPS estimates are at Rs70.5/75/87 for FY19/20/21E, revised by +2%/-1.5%/+0.2% respectively. Stock trades at 22.3x...

Maintain BUY with TP of Rs 1,950, at 22x Sep-20E EPS L&T; Technology Services (LTTS) posted strong rev performance (in-line) and better operating performance (offshore, FP-contract), led by transportation/process industry verticals and strong client adds. Revenue guidance increased to >21% YoY for FY19E (>16% earlier). Revenue came at USD 177mn, 5.5/29.5% QoQ/YoY in CC.

We attended the analyst meet of L&T; Technology Services (LTTS). LTTS is one of the leading players in the ER&D; space with a presence in transportation (31.8% of revenue), industrial products (22.8%), telecom & hi-tech (25.7%), process industry (12.9%) and medical devices (6.8%). The company elaborated on its 20:20:20 vision of achieving 20% topline growth, 20% EBITDA margin and 20 new technology patents annually to achieve US$1 billion (bn) in FY21. Of the US$1 bn revenue target, ~US$100 mn will be achieved through acquisitions. The rest would be...

Maintain BUY with TP of Rs 1,520, at 22x FY20E-EPS. L&T; Technology Services (LTTS) posted robust growth and operating performance. Revenue came at USD 169mn, 5.6/33.2% QoQ/YoY in CC with continuity of strong business momentum (6.6% CQGR organic over past three qtrs). EBITDA% stood at 17%, +95bps QoQ, supported by better business-mix (process industry-led growth), higher offshore-mix/ FP-contract and INR depreciation, offset by visa expense and lower utilisation (fresher intake).

Maintain BUY with TP of Rs 1,500, 22x FY20E EPS. L&T; Technology (LTT) posted strong growth with revenue at USD 162mn, 7.5% QoQ (5.5% QoQ excluding the one-time revenue from Esencia IP sale). Growth was broad-based with Transportation vertical (30.8% of rev) leading the growth at 7.2% QoQ. EBITDA% came in-line at 15.5%, +22bps QoQ (16.1% adjusted for Rs 55mn one-off). Margin improvement was supported by better offshore-mix and higher utilisation (80.7% in 4Q).