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Dolat Capital Report
L&T Technology Services Ltd. remained under pressure after Dolat Capital maintained its 'Sell' rating on the stock and reduced its target price to Rs 2,950 from Rs 3,250 following the company's Q1 FY27 earnings.
At the brokerage's revised target price, the stock implies around 10% downside from the current market price of Rs 3,293.
Revenue grew 1.5% QoQ CC to $310 million as vertical's performance was mixed (heavily dented by Hi-tech's degrowth), while operating profit margin expanded 47bps QoQ to 15.7%, aided by better mix, selling, general and administration discipline and operational efficiencies.
Demand remained subdued, with some large deal closures slipping into early Q2 despite healthy TCV momentum; while mgmt reiterated its 13–15% rev CAGR aspiration, achieving it remains challenging amid absences of any triggers that can throttle rev growth.
Valuation
L&T Tech's long-term fundamentals remain intact, backed by strong engineering capabilities and client relationships. However, its 13–15% revenue CAGR aspiration under the Lakshya plan appears ambitious, and the brokerage await evidence of execution through sustained growth and margin expansion.
With much of the medium-term optimism already reflected in valuations, Dolat Capital remains watchful. Consequently, retains ‘Sell' rating with a revised target price of Rs 2,950 at 18x PER (FY28E EPS of 164).
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