Motilal Oswal's research report on Larsen and Toubro Technology Services
L&T Technology (LTTS) posted in-line revenue of USD288m in 2QFY24, up 3.2% QoQ CC (incl. SWC). Growth was driven by Transportation and Plant Engineering verticals, with 4.4% and 3.8% QoQ growth, respectively. Despite in-line revenue, LTTS management has cut its FY24 revenue growth guidance to 17.5-18.5% vs. 20% YoY earlier. The guidance revision was due to an elongated United Auto Workers strike (UAW) in the US, which is leading to a pause in multiple projects and causing deferrals in ramping up new projects. EBIT margin wasflat (down 10bp QoQ), beating our estimate of a 90bp drop as it completely absorbed the Q2 wage hike impact. The margin improvement was attributed to a better business mix. Transpiration/Plant Engineering reported margin improvement of 120bp/110bp QoQ. The management has maintained its FY24 margin guidance (17%+) despite a cut in its revenue growth guidance.
Outlook
We lower our FY24 EPS estimate by 1.3% to factor in revised revenue guidance, but we keep our FY25 EPS estimate intact. We retain our BUY rating on the stock with a TP of INR 5,210 (premised on 35x FY25E EPS).
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