Yet another resilient performance
LTI reported revenue (CC) / EBIT / PAT growth of 11%/29%/17% YoY v/s our estimate of 10%/28%/8% YoY.
* On a sequential basis, revenue declined ~4.7% (CC), in line with our estimate. While part of this decline (~1.4%) is due to the absence of pass-through revenue during the quarter, the rest is attributable to COVID-19-led disruption.
* Verticals such as Manufacturing (-16% QoQ, CC) and Energy & Utilities (-11% QoQ, CC) were the hardest hit. Impact from the absence of pass-through revenue would have been felt largely in the Manufacturing vertical. Hi-Tech (-0.1% QoQ, CC), Insurance (-2.7% QoQ, CC), and BFS (-4.1% QoQ, CC) remained relatively resilient.
* North America remained surprisingly resilient (-2.2% QoQ, CC). Other geographies such as Europe (-10% QoQ, CC), India (-13% QoQ, CC), and RoW (-8% QoQ, CC) witnessed relatively sharper decline.
* Decreases witnessed across the Top 5 clients (-7% QoQ, USD) were more pronounced than in the overall portfolio. Decline in the Top 6–10 clients (-16% QoQ) was even sharper.
Margins largely stable (adjusted for one-offs)
* On a reported basis, the EBIT margin expanded 70bp QoQ. However, adjusted for a one-off contribution to the PM CARES fund, margins were largely stable.
* SG&A cost control was impressive (to 12.3% of revenue from 13.5% of revenue in Mar’20).
* Utilization (ex-trainees) reported a marginal drop (~100bp QoQ to 79.6%). * Receivables (including unbilled) came down sharply during the quarter (from 106 to 99 days).
Valuation and view:
We would revisit our estimates post the earnings call. Outlook on recovery across verticals, margins, and commentary on deal wins would be keenly watched. Based on current estimates, it trades at 22x/20x FY20E/FY21E EPS. Maintain Buy.
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