Buy Larsen and Toubro Technology Services; target of Rs 4850: Choice Equity Broking

Choice Equity Broking's report on Larsen and Toubro Technology Services

Revenue for Q4FY25 came at INR 29.8Bn, up 17.5% YoY and 12.4% QoQ (vs consensus est. at INR 30.3Bn). EBIT for Q4FY25 came at INR 3.9Bn, down 8.0% YoY and 6.6% QoQ (vs consensus est. at INR 4.5Bn). EBIT margin was down 367bps YoY and 270bps QoQ to 13.2% (vs consensus est. at 14.8%). PAT for Q4FY25 stood at INR 3.1Bn, down 8.7% YoY and 3.5% QoQ (vs consensus est. at INR 3.5Bn). LTTS achieved record TCV with USD 80Mn+ deal; Double digit USD CC growth expected in FY26E: LTTS delivered robust deal wins in Q4FY25 and FY25, setting a new record for large deal TCV bookings, surpassing Q3FY25. Q4FY25 saw major wins, which included one USD 80Mn+, one USD 50Mn+, one USD 30Mn+, one USD 20Mn+, and three deals above USD 10Mn. Large deal inflows rose over 25% QoQ, many secured against competition, highlighting LTTS’s differentiated offerings and growing market share.

Outlook

However, we assign a PE multiple of 30x (earlier 32x), still above other Tier-II ER&D peers, supported by better revenue visibility in favorable environment, healthier return ratios, & better margins. We expect Revenue/ EBIT/ PAT to grow at CAGR of 10.9%/ 14.4%/ 14.3% over FY25-27E. Consequently, we maintain our rating to BUY but lower our target price to INR4,850, based on FY27E EPS of INR 161.6.

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