Larsen & Toubro Infotech - Analyst Meet Update - ICICI Direct

We attended the virtual analyst meet of Larsen & Toubro Infotech (LTI). The company highlighted that it aspires to achieve US$1 billion in cloud revenues in the next three years from current US$180 million implying 77% CAGR over the next three years from this unit. In addition, LTI has won a large deal in the UAE amounting to ~AED760 million (~US$205 million) over the next six years. This, coupled with a healthy large deal pipeline (up 62% YoY to US$1.98 billion) and increased investment to drive sales growth makes the company confident of being in an industry leading revenue growth quartile (that we believe could be at least 15% YoY in coming years). Further, LTI plans to invest in sales & marketing, M&A, localisation and drive revenue growth via investments. However, despite investment, the company aims to maintain 14-15% net profit margin.

Valuation & Outlook

LTI in its analyst meet has also highlighted focus on digital technology and a structural shift towards cloud & ancillary technologies like data & Artificial Intelligence (AI). We believe the IT industry is on the cusp of a multi-year technology transformation phase. Considering LTI's prowess in digital technology coupled with ability win large deal, scale existing clients, ability to execute end to end projects and adding new logos will enable it to deliver industry leading revenue growth in coming years. This, coupled with the company's ability to maintain 14-15% net margins despite increased investments, is another key positive. Hence, we maintain our BUY rating on the stock with a revised target price of Rs. 3850 (26x FY23E EPS).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_LTInfotech_AnlstMtUpdate_Dec20.pdf

Shares of Larsen & Toubro Infotech Ltd was last trading in BSE at Rs.3261 as compared to the previous close of Rs. 3254.9. The total number of shares traded during the day was 47607 in over 1146 trades.

The stock hit an intraday high of Rs. 3290.8 and intraday low of 3245.1. The net turnover during the day was Rs. 155131586.

Source : Equity Bulls

Keywords