L&T Technology Services Ltd. share price target

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).

L&T; Technology Services (LTTS) surprised again with a 7.5% QoQ USD revenue growth in 4QFY18. It expects revenues to grow at least 16% in FY19 and at 15% CAGR to USD1bn in FY21 (including USD c.120mn from future acquisitions) given strong deal wins/pipeline. It also expects concurrent margin expansion that could be amplified by the INR depreciation. We raise our recurring FY19/FY20 EPS estimates by c.4% each. While the stock's valuation appears optically rich at 19x FY20F EPS, we believe the strong earnings momentum (17% FY18-20 CAGR) and a superior business portfolio should sustain that. Maintain BUY with a...

LTTS reported strong Q3 revenue growth, ahead of estimates, up 8.4% QoQ led by strong show in Telecom-Hitech vertical (28% of revenue; up 24.8% QoQ). Despite wage impact, EBITDA margin (at 15.3%) was flat QoQ led by strong cost control (employee cost down 280 bps QoQ).

LTTS reported strong Q2 revenue growth (up 9.2% QoQ in USD terms/8.7% in cc terms) led by strong show in Top 30 clients (up ~12% QoQ). EBITDA margin (at 15.3%) was flat QoQ.

Maintain NEUTRAL with a TP of Rs 805, 15x Sep-19E EPS. L&T; Technology (LTT) posted strong revenue numbers (large accounts-led), while operating performance was in-line with estimates. Revenue came in at USD 139mn, 9.1% QoQ (5.6% organic), supported by strong growth in the Top-5 accounts (60% of incremental sequential growth in 2Q). EBITDA% came in at 15.3%, -2bps QoQ (15.5% est.), supported by lower SG&A;, which offset the negative impact of high onsite growth. APAT came in at Rs 1.1bn, 12.3% QoQ.

We return positive from LTTS' analyst meet. With a well-articulated growth strategy (esp. multi-vertical leadership, T30:A3 for client mining), marquee clients (48+ of Top 100 R&D;) and an impressive differentiated solutions portfolio (iBEMS, UBIQWeise etc.)

Valuations at 14x FY19E (MidCap-IT at 12.2x) may limit the upside. Maintain NEUTRAL with a TP of Rs. 800, 15x FY19E EPS. We attended L&T; Technologys (LTT) Analyst Meet, where the company showcased its IPs and multiple solutions (transportation value-engg. services, connected worker IoT etc). Going ahead, LTTs growth will be led by (1) Large client mining (geo-expansion strategy), with 48 clients from the global Top-100 R&D; spenders, (2) Diversified vertical mix (recovery in the Process Industry vertical), (3) Business de-risked from client concentration (lowest Top-10 revenue share vs peers at 37%), (4) Acquisition synergies (Esencia) in the Telecom and Hi-tech vertical, and (5) Margin levers of utilisation, fixed-price and IP revenue.