YES Securities' research report on Larsen and Toubro Technology Services
L&T Technology Services (LTTS) reported broadly inline financial performance for the quarter. Both, the sequential revenue growth and EBIT margin were as per expectation. It reported revenue growth of 0.9% QoQ in USD terms. The cc revenue growth was 0.9% QoQ in cc terms. There was sequential increase in EBIT margin (up 11 bps QoQ) to 17.2%. led by positive operating efficiency. Employee attrition continues to decline as LTM attrition decreased by 90 bps QoQ to 15.8%. The near term demand environment remains challenging as the clients across sectors remain cautious regarding the evolving macroeconomic situation leading to slow decision making and thus impacting near term revenue performance. Improving employee pyramid and falling employee attrition will support operating margin going ahead. We estimate revenue CAGR of 17.1% (including impact of SWC acquisition) over FY23‐26E with average EBIT margin of 18.6%.
Outlook
We maintain our NEUTRAL rating on the stock with revised target price of Rs 5,447/share at 31x on FY26E EPS. The stock trades at PER of 34.4x/30.5x on FY25E/FY26E EPS.
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