YES Securities' research report on Larsen and Toubro Technology
L&T Technology Services (INFO) reported mixed financial performance for the quarter. Both, the sequential revenue growth and EBIT margin were slightly below expectation. It reported revenue growth of 9.8% QoQ in USD terms, led by acquisition of SWC, which got completed with effect from 1st April 2023. Organic growth was 0.6% QoQ in cc terms. There was sequential decline in EBIT margin(down 155 bps QoQ) to 17.2%. impacted due to low margin SWC business. Employee attrition continues to decline as LTM attrition decreased by 330 bps QoQ to 18.9%. The long term demand environment remains intact led by growing outsourcing of ER&D services. However, 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.
Outlook
We estimate revenue CAGR of 18.2% (including impact of SWC acquisition) over FY23‐25E with average EBIT margin of 17.7%. We maintain our NEUTRAL rating on the stock with revised target price of Rs 4,295/share at 29x on FY25E EPS. The stock trades at PER of 32.5x/27.5x on FY24E/FY25E EPS.
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