Emkay Global Financial's research report on Larsen and Toubro Technology Services
LTTS’s operating performance in Q3 was a mixed bag. Revenue grew 0.9% QoQ (0.9% cc) but missed our expectations, while the 17.2% EBITM was a tad above our estimate. Company reported 6 large-deal wins (TCV of over USD10mn) and two empanelment agreements (with ‘bp’ and an auto OEM), with the pipeline seeing improvement from the previous quarter. The management highlighted that interactions with clients suggest CY24 tech spending to be steady/slightly higher, with continued focus on cost takeout, efficiency, and value engineering. The management is seeing some early green shoots, and metaphorically stated: winter is over, and spring is around the corner. LTTS retained FY24 revenue growth guidance of 17.5-18.5%, implying 4-7% QoQ growth in Q4, with a high degree of confidence on the lower end due to SWC seasonality as well as planned deal ramp-ups and working towards the upper-end, assuming new deal-wins.
Outlook
We largely retain our FY24-26 estimates. Given the rich valuations, we retain REDUCE on LTTS, with unchanged TP of Rs 5,050 at 30x Dec-25E EPS.
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