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Neutral L&T Technology Services Ltd For Target Rs. 4,689 - Yes Securities
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Result Synopsis
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 2.9% QoQ in USD terms. The cc revenue growth was 3.2% QoQ in cc terms. There was sequential decline in EBIT margin(down 11 bps QoQ) to 17.1%. led by impact of wage hike in the quarter. Employee attrition continues to decline as LTM attrition decreased by 220 bps QoQ to 16.7%.
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 17.5% (including impact of SWC acquisition) over FY23?25E with average EBIT margin of 17.9%. We maintain our NEUTRAL rating on the stock with revised target price of Rs 4,689/share at 31x on FY25E EPS. The stock trades at PER of 37.3x/30.6x on FY24E/FY25E EPS.
Result Highlights
* Reported revenue of Rs 23.9bn (up 3.7% QoQ in INR terms, up 2.9% QoQ in USD terms). The sequential revenue growth was led by Transportation vertical (up 4.5% QoQ), Plant Engineering (up 3.6% QoQ) and Telecom & Hitech (up 2.5% QoQ).
* EBIT margin decreased by 11 bps QoQ to 17.1%, due to higher D&A expense (up 18.6% QoQ).
* Deal bookings remained healthy during the quarter, it won 7 USD 10 million plus TCV deal out of which 6 deals were USD 15 million plus TCV deal.
* The offshore revenue mix increased by 30 bps QoQ to 59.6%. Number of Active clients increased to 362 clients in Q2FY24 from 357 clients in Q1FY24.
* Headcount grew by 488 QoQ to 23,880 employees. LTM attrition decreased by 220 bps QoQ to 16.7%.
* Revised Guidance for FY24, USD revenue growth guidance of 17.5% to 18.5% in constant currency.
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SEBI Registration number is INZ000185632
