L&T Technology Services soars 8% on healthy Q4 results, strong outlook

Shares of L&T Technology Services (LTTS) moved higher by 8 per cent to Rs 3,738.90 on the BSE in Thursday’s intra-day trade after the company recorded 18 per cent year-on-year (YoY) jump in net profit to Rs 310.9 crore for the quarter ended March 2023.

Revenue from operations grew 19.4 per cent YoY and 2.3 per cent quarer-on-quarter (QoQ) to Rs 2,096 crore, with strong growth in key verticals of transportation, plant engineering, and industrial products. The company reported a revenue growth of 2.2 per cent QoQ in constant currency (CC) terms while in dollar terms the revenue grew by 2.9 per cent QoQ to $255.1 million. In rupee terms the revenue grew by 2.3 per cent QoQ.

EBIT (earnings before interest and tax) margin of the company was flat at 18.7 per cent QoQ as the decline in employee cost was negated by higher SG&A expenses. The company during the quarter hired 584 net new employees & LTM attrition declined by 110 bps. The company in Q4 won a large deal of $40 million & 3 other deals of $10 million worth total contract value (TCV).

For FY24 the company has guided CC revenue growth of 20 per cent plus with organic growth of 10 per cent plus.

“We are negotiating several deals and the pipeline is fairly strong. The number of deals we have signed in TCV in FY23 is similar to last year. We have ended the year with our five key segments doing very well, which I feel will be good for us for next year,” Amit Chadha, chief executive officer and managing director, LTTS said.

“The pipeline remains quite healthy for the Transportation segment and LTTS aspires to deliver 4 per cent QoQ growth in Q1FY24 for the segment. However, valuations have corrected sharply over the last one year and are now at 22x FY25E EPS, which we see as attractive due to a better outlook for the Engineering and R&D (ER&D) services industry compared to the broader IT services universe, Motilal Oswal Financial Services (MOFSL) said in its note.

Digitization is driving the accelerated spends in ER&D and LTTS should benefit due to its strong capabilities, multi-vertical presence, and solid wallet share. The brokerage firm expects the company to deliver strong revenue growth over the coming years.

“We continue to view LTTS as a beneficiary of the growing penetration of ER&D Services. We raise our FY24-25 EPS estimates by 3 per cent on account of a good Q4 performance and retain our BUY rating on the stock. We value LTTS at Rs 4,040 (premised on 26x FY25E EPS),” MOFSL said.