Buy Larsen and Toubro Technology; target of Rs 6300: Motilal Oswal

Motilal Oswal's research report on Larsen and Toubro Technology

We attended LTTS’ analyst day, where the management spelt out its aspiration of achieving a revenue run rate of USD2b and EBIT margin of 17-18% over the medium term. Growth drivers remain intact for key verticals across the ER&D client universe, and LTTS has carved out three new verticals to alter its go-to-market (GTM) strategy. The company’s GTM strategy now focuses extensively on high-growth areas such as Mobility (software-defined vehicles and electrification), Sustainability (industrial products and plant engineering), and Tech (medical devices, communications, hi-tech, smart cities). The new strategy may not alter the growth path in the short term, but if executed correctly, it could boost long-term growth for the company, in our view.

Outlook

We raise our target multiple to 40x FY26E EPS, as we believe the new strategy opens up new avenues for growth, especially in hitherto weak areas such as Mobility, which is growing fast across its peers. We keep our estimates unchanged and maintain our BUY rating with a TP of INR6,300 (15% upside).