Buy Larsen and Toubro Technology; target of Rs 2030: Sharekhan

Sharekhan's research report on Larsen and Toubro Technology

Q2 numbers beat estimates on all fronts, with solid deal TCVs, robust deal pipeline and strong FCF generation; EBIT margin improved 161 bps q-o-q to 13.7% in Q2FY2021, exceeding expectations. The management guided for a decline of 7-8% in US Dollar revenues as against a 9-10% drop expected earlier for FY2021, translating a 3.4-4.8% q-o-q growth for the remaining quarters of FY2021; EBIT margin likely to improve, led by higher utilisation, better revenue mix and operational efficiencies. We expect LTTS’ revenue and earnings to clock a CAGR of 13% and 20% over FY2021-23E, led by strong deal wins, strong account mining activities and higher demand for digital and leading-edge technologies.

Outlook

We maintain a Buy on L&T Technology Services (LTTS) with a revised PT of Rs. 2,030, given its strong position in fast growing ERD space.