Emkay Global Financial's research report on Larsen and Toubro Technology Services
LTTS reported steady revenue performance, while margin missed expectations. Revenue grew 3.9% QoQ to USD306.7mn, led by broad-based growth. EBITM declined by 50bps QoQ to 15.1%, missing our estimate. LTTS won two USD20mn and four USD10mn TCV deals, and signed 2 significant empanelment agreements in Sustainability. Despite a moderate H1, management retained FY25 revenue growth guidance of 8-10% CC, implying 4.5-7% CQGR over Q3- Q4 which is a tough ask, in our view. Broad-based growth in Q2, strong deal pipeline, SWC seasonality, and expected milestone booking in the Maharashtra cybersecurity project give management confidence on H2 being better than H1 and delivering on guidance.
Outlook
With growth improving and more deals in strategic areas, mgmt expects the EBITM trajectory to improve in H2 and has retained ~16% EBITM guidance for FY25. LTTS reaffirms its medium-term aspiration of USD2bn revenue with EBITM of 17-18%. We trim FY25-27E EPS ~1%, building in the Q2 performance; retain REDUCE and TP of Rs5,000 at 30x Sep-26E EPS.
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