Neutral Larsen and Toubro Infotech; target of Rs 6430: Motilal Oswal
Motilal Oswal recommended Neutral rating on Larsen and Toubro Infotech with a target price of Rs 6430 in its research report dated October 18, 2021.
October 19, 2021 / 02:32 PM IST
Motilal Oswal's research report on Larsen and Toubro Infotech
LTI’s revenue growth, in USD terms, stood at 8.9% QoQ CC in 2QFY22, above our estimate of 5.4%. Growth was broad based across verticals, service lines, geographies, and client buckets. Broad based industry growth was led by BFS and Manufacturing. EBIT margin expanded by 80bp QoQ to 17.2% in 2QFY22 (est. 16.7%), led by SG&A leverage, offshoring, and higher working days, partially offset by utilization and higher costs. - The management highlighted that the demand environment is one of the strongest. It expects demand to remain strong over the next three years. Despite the absence of large new deal wins in recent quarters, LTI’s growth momentum is one of the strongest in its history, indicating the broad based nature of the demand environment. We continue to view LTI as one the best placed companies in our coverage universe, with a strong client mining ability. We expect it to deliver 23% revenue CAGR in USD terms over FY21-23E, one of the highest in our Tier II coverage.
While we remain confident of the company’s execution capabilities, we remain on the sidelines on the back of a significant valuation re-rating. We value the stock at 40x FY23E EPS to arrive at our TP of INR6,430, We maintain our Neutral rating.
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