L&T Technology Services Ltd. share price target

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).

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.