Buy L&T Technology; target of Rs 1305: Axis Direct

Axis Direct's research report onL&T Technology

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).

Outlook

We forecast ~18% USD revenue CAGR over FY18-20. EBITDA margin improvement of ~200 bps to 17.5% in FY20 will be driven by better offshore mix,employee pyramid rationalization, and operating efficiencies. Maintain BUY with TP of Rs 1,305 (20x FY20E), implying an upside of 29% from CMP of Rs 1,014.The stock trades at 19x/ 16x FY19E/ FY20E EPS of Rs 53/ Rs 65.

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