Soft Q3, near-term upside capped
L&T Technology Services (LTTS) posted weak revenue performance, resulting in a guidance cut, but an in-line operating performance. Revenue growth was flat sequentially, impacted by higher-than-expected furloughs in the plant engineering vertical and weakness in the telecom & hi-tech vertical. Key positives include (1) five deals of USD 10mn+ TCV booked in Q3 as compared to eight deals in H1FY23; (2) traction in the transportation vertical, also supplemented by empanelment from Airbus as a strategic partner, which will augment growth in the vertical; and (3) recovery in the plant engineering vertical in Q4, aided by a strong pipeline. The key strategic imperatives for the company are now integration of Smart World & Communication (SWC) acquisition, which can increase its deal pipeline in the telecom & hi-tech vertical. While FY23E revenue growth guidance was cut to 15% CC (from 15.5- 16.5% CC), the medium-term outlook was maintained at USD 1.5bn revenue run rate by FY25E (implying 3.4% CQGR post-SWC consolidation in Q1FY24E). We expect low-teen organic growth and see increased volatility ahead and lower return metrics as LTTS consolidates SWC. Maintain ADD on LTTS, with a TP of INR 3,600, based on 26x Sep-24E EPS (28x earlier).
Shares of L&T Technology Services Limited was last trading in BSE at Rs. 3231.95 as compared to the previous close of Rs. 3399.40. The total number of shares traded during the day was 57082 in over 14520 trades.
The stock hit an intraday high of Rs. 3351.95 and intraday low of 3218.00. The net turnover during the day was Rs. 187028381.00.