Mr. Apurva Prasad, Institutional Research Analyst, HDFC Securities & Mr. Amit Chandra, Institutional Research Analyst, HDFC Securities
We maintain ADD on L&T Infotech (LTI), following a robust 3Q (in-line) and continuity in its growth leadership ahead. The positive outlook is premised on (1) strong net new large deal TCV at USD 278mn (including USD 204mn Injazat deal) as compared to USD 235mn in TTM, (2) robust growth across client buckets validating client mining prowess (F500 base of 69 accounts), (3) improving partner rankings with leading cloud providers & hyperscalers and traction in LTI Canvas & Mosaic platform, (4) broad-based momentum across verticals and BFS outperformance driven by public cloud, platform (Nordic) and core infrastructure transformation projects. LTI's valuation premium to peers reflects its growth/return metrics outperformance vs. peers and the franchise's scalability on a sustainable swing. Our target price of Rs 4,280 is based on 26x Dec-22E EPS, supported by industry-leading 25% EPS CAGR over FY21-23E, >50% RoIC.
3QFY21 highlights: (1) Revenue came in line at USD 428mn (USD 426mn estimated), +5.3/+7.4% QoQ/YoY (CC terms). (2) Digital (44.4% of revenue) grew +9.5/17.5% QoQ/YoY, supported by strong demand for cloud-based IT- solutions. (3) EBIT margin came at 20.6%, +75bps QoQ (19.9% est), supported by enhanced productivity, higher offshore-mix and SG&A leverage. (4) Better growth in BFSI (+7.5% QoQ CC) and Manufacturing vertical (+9.2% QoQ CC) offset the flattish Insurance/E&U verticals. (4) T5/T10 accounts improved +3.3/3.5% QoQ, while T11-20 outperformed with +7.2% QoQ growth in USD terms. (5) Wage hike to be rolled out in 4QFY21, which will negatively impact margins to the extent of -160 to -170bps.
Outlook: We have factored in USD revenue growth of 9.9/20.9/15.4% and EBIT margin at 19.5/19.4/20.0% for FY21/22/23E respectively. APAT margin is estimated at 15.4/16.0/16.5% for FY21/22/23E. At CMP, LTI trades at 29.1/23.8x FY22/23E (3Y average at 20x).
Shares of Larsen & Toubro Infotech Ltd was last trading in BSE at Rs.3977.9 as compared to the previous close of Rs. 4092.05. The total number of shares traded during the day was 17572 in over 4606 trades.
The stock hit an intraday high of Rs. 4179.95 and intraday low of 3962.35. The net turnover during the day was Rs. 71212610. |
