While analysts believe LTI would continue to report industry-leading growth, despite delivering nearly double-digit growth in FY2021, their price targets based on Monday’s high suggest limited upside opportunity.
L&T Infotech said the demand trend continues to be robust and the best-ever seen by the company. It is confident of comfortably crossing the revenue milestone of $2 billion in FY22. The management continues to expect FY22 PAT margin to be in the 14-15 per cent range.
For the quarter, the company had one client in the $50 million range, three in $20 million and five each in $5-10 million bucket.
Motilal Oswal Securities said despite the absence of large new deal wins in recent quarters, LTI’s growth momentum has been one of the strongest in its history, indicating the broad-based nature of the demand environment. Motilal said LTI is one the best placed companies in its coverage universe, with a strong client mining ability.
“Strong growth to sustain, but valuations remain punchy,” it said while suggesting a target of Rs 6,430 on the stock. The target suggests 8 per cent potential downside.
Sharekhan said the stock was trading at 38 times FY22 and FY32 times FY2024 earnings, which although expensive, was justified given its market-leading revenue growth potential with stable margin, strength in its business model, and strong return ratios.
But following an 18 per cent upside on Tuesday, Sharekhan’s target of Rs 5,750 suggests a potential 18 per cent downside.
“The company is expected to witness sustainable growth leadership in FY2022E on account of strong client relationships, recovery in impacted verticals, strong spending in top accounts in resilient verticals, prudent hiring and talent policies, and superior digital competency position. We estimate LTI to report dollar revenue CAGR of 17 per cent and EPS CAGR of 19 per cent over FY2020-FY2024E,” it said.
On the results front, the IT firm logged a 20.8 per cent increase in consolidated net profit at Rs 551.7 crore for September quarter compared with Rs 456.8 crore in the same period a year ago.
Revenue during the quarter jumped 25.6 per cent to Rs 3,767 crore compared with Rs 2,998.4 crore in the year-ago period. On a sequential basis, the net profit was up 11.1 per cent while the topline rose 8.8 per cent.
Describing L&T Infotech as ‘consistently consistent’, ICICI Securities said what differentiates the company from most other IT companies is the strong growth despite a tall base in FY21.
“Typical seasonality of H2 being better than H1 is expected to continue in FY22. If LTI is able to achieve such exit-rate in H2, revenue growth in FY23 too will remain robust even if demand moderates during FY23,” it said while suggesting a target of Rs 7,050, indicating limited upside.
L&T Infotech said its EBIT margin increased 80 bps sequentially to 17.2 per cent led by positive operating leverage as selling, general & administrative expenses declined to 11.5 per cent of revenues from 12.3 per cent in Q1.
“We believe LTI will continue to deliver industry-leading growth. The stock is trading at 31.8 times FY23E. We maintain buy with a revised target of Rs 7,505 based on strong growth and rollover to Q4FY23E,” Edelweiss said.
