Shares of engineering services player L&T Technology Services (LTTS) slipped 3.6 percent in early trade on October 18 as investors digested the company’s cut in revenue guidance despite reporting in-line revenue. L&T Tech reported a revenue, for the quarter ended September 2023, of Rs 2,386 crore, a growth of 4.6 percent year-on-year (YoY). Growth was led by the transportation vertical, which continued its strong momentum from last quarter, and plant engineering. The EBIT margin came ahead of expectations at 17.1 percent, despite salary increments and continued investments in technology.
As of 9.20 a.m., shares of LTTS were trading at Rs 4,461.75, lower by 3.29 percent on the NSE.
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However, in spite the company’s revenue meeting estimates, the management has cut its FY24 revenue growth guidance to 17.5-18.5 percent from 20 percent YoY earlier. The guidance revision was due to an elongated workers strike in the US, which is leading to a pause in multiple projects and causing deferrals in ramping up new projects.
What analysts are saying
Brokerages have mixed calls on the counter. Morgan Stanley has an ‘underweight’ rating, issuing a target price of Rs 4,000 per share. The cut in the revenue growth guidance was a negative surprise, and the brokerage believes the stock could underperform as a result of its premium valuation.
Nomura lowered its USD FY24F revenue growth forecast for the company by 70 bps to 17.1 percent, maintaining its ‘reduce’ call. The brokerage noted that instead of a strong Q3, the company is “witnessing longer decision cycles and incremental headwinds from the macro-economic stress in various geographies”. This could lead to a usual furlough-hit Q3 playing out.
In contrast, Motilal Oswal and Choice Broking have a 'buy' and 'add' rating on the counter, respectively. The brokerages noted that the strong pipeline of opportunities across all sub-segments, "impressive clientele", and the full integration of SWC will help LTTS sustain its growth momentum.
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