Apurva Prasad, Institutional Research Analyst, HDFC Securities and Amit Chandra, Institutional Research Analyst, HDFC Securities.
L&T Infotech - All's well
L&T Infotech's (LTI) revenue and margin came in line in Q2FY23. Revenue growth of 4.6% QoQ and 21.6% YoY CC and flat margin sequentially supported the 23% YoY growth in profit. Key growth drivers include (1) continuity in netnew large deal TCV at USD 80mn (similar to 4QFY22/1QFY23 rate), including a new logo F500 win (Hi-Tech vertical); (2) strong H2 seasonality of LTI ahead; (3) 4.5% QoQ increase in headcount (crossing 50k); and (4) steady large deal pipeline with higher deal tenure and strong outlook of core vertical BFSI (no exposure to mortgage segment). Integration with Mindtree will create serviceline and vertical revenue synergies and we believe that the foundation for growth leadership in 'tier-1' IT has been set. Maintain BUY on LTI with a TP of INR 5,215, based on 29x Jun-24E EPS.
Q2FY23 highlights: (1) LTI's revenue came in line with our estimate of USD 601mn, +3.6/+18.1% QoQ/YoY (+4.6/+21.6% QoQ/YoY CC terms), led by growth in offshore/onsite volume of +5.2% QoQ each. (2) Among the verticals, growth was led by energy & utilities (+14% QoQ CC), BFS (+5% QoQ) and insurance (+4.5% QoQ) while hi-tech declined by -4.7% QoQ CC, impacted by large project transitioning from onsite to offshore. (3) EBITM increased by 13bps QoQ to 16.1% (marginally lower than our estimate of 16.3%), impacted by increase in employee cost (senior-level wage increase) & lower utilisation, which was offset by FX tailwind. (4) Top-5 accounts improved +5% QoQ and the top-10 accounts grew by +4.1% QoQ in USD terms. (5) LTI added 2,215 employees in Q2FY23 (1,600 freshers) and it remains on track to add 6,500+ freshers in FY23. (6) LTI expects the PATM to continue in the range of 14-15% for FY23E.
Outlook: We have factored in USD revenue growth of +17.4/13.7/13.9% and EBITM of 16.1/16.5/16.6% for FY23/24/25E. APATM is estimated at 13.5% for FY23/24/25E. At the CMP, LTI is trading at 26.7x FY24E, with an FY22-25E EPS CAGR of 15%.
Shares of Larsen & Toubro Infotech Limited was last trading in BSE at Rs. 4721.80 as compared to the previous close of Rs. 4639.40. The total number of shares traded during the day was 10810 in over 1942 trades.
The stock hit an intraday high of Rs. 4785.60 and intraday low of 4673.00. The net turnover during the day was Rs. 50993344.00.