L&T Infotech – execution record and bullish business outlook justifies price

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26 Aug, 2025 12:21

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Madhuchanda DeyMoneycontrol Research

L&T Infotech (LTIL) reported a strong June quarter with above-industry growth performance, improved operating margin and a bullish outlook on business The stock has outperformed benchmark indices recently, and at 18 times FY20 estimated earnings, is not cheap. Still, given its execution track record and bullish outlook on business, the stock merits attention.

Source: Company

Strong revenue performance
LTIL's quarterly revenue grew 3.5 percent to $319.9 million compared to the preceding quarter. In constant currency, the quarter-on-quarter growth was an impressive 5.1 percent and the year-on-year (YoY) growth was 22.9 percent. The management commentary suggests no signs of growth slowing down.

Among verticals, banking financial services, high-tech media and entertainment, retail & pharma and insurance, reported strong growth. The management mentioned that post-tax cuts in the US and the strength in the economy, North American financial services clients have started spending meaningfully on digital as they seek to transform their business. Data and compliance are important spend areas for banks.

The subdued performance of manufacturing in the quarter was due to a higher base of the preceding quarter. LTI’s management expects the energy vertical to revive from the next quarter and the deal signed with Exxon in Q4 FY18 should help.

Source: Company

Digital is driving growth across sectors. For LTIL, digital grew almost double the company’s average at 43 percent and formed 34 percent of the total revenue. The company now has 150 customers using digital.

Margin outlook positive
LTIL reported 181 basis points sequential improvement in margin to 17.7 percent on the back of tailwinds from rupee depreciation that contributed close to 130 basis points. Operational improvement, better realisation and strong utilisation were positive contributors that were partially negated by visa costs. The company expects to maintain margin, going forward.

Deal wins provide comfort
Deal wins remain healthy. In the June quarter, the company announced a large deal with a Global Fortune 100 consumer and pharmaceutical giant with a net-new deal value in excess of $50 million.

Client metrics was comforting with revenues from top 5, 10 and 20 clients growing sequentially by 7.6 percent, 5 percent and 5 percent, respectively.

The management mentioned that the nature of the deals are changing with shrinking of deal sizes as well as duration, but the pipeline remains extremely strong.

Robust growth outlook
The company sounded optimistic about the environment given its cutting-edge capabilities, next-generation delivery model and its domain focus. Revival in the global economy is also providing a tailwind.

While the stock has had a decent run-up and the multiples have re-rated, we expect earnings growth in the twenties in the next couple of years. The price performance should track earnings traction hereon. Rupee depreciation could be an additional tailwind. Investors should log on to this high visibility play.