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Yes Securities Report
L&T Technology Services Ltd. reported mixed financial performance for the quarter. Both, the sequential revenue growth and Ebit margin were slightly below expectation.
L&T Technology reported revenue growth of 9.8% QoQ in U.S. dollar terms, led by acquisition of Smart World & Communication, which got completed with effect from April 01, 2023. Organic growth was 0.6% QoQ in constant currency terms.
There was sequential decline in Ebit margin (down 155 bps QoQ) to 17.2%. impacted due to low margin SWC business. Employee attrition continues to decline as last twelve months attrition decreased by 330 bps QoQ to 18.9%.
The long term demand environment remains intact led by growing outsourcing of engineering research and development services. However, the clients across sectors remain cautious regarding the evolving macroeconomic situation leading to slow decision making and thus impacting near term revenue performance.
Improving employee pyramid and falling employee attrition will support operating margin.
We estimate revenue compound annual growth rate of 18.2% (including impact of SWC acquisition) over FY23‐25E with average Ebit margin of 17.7%.
We maintain our 'Neutral' rating on the stock with revised target price of Rs 4,295/share at 29 times on FY25E earnings per share.
The stock trades at price-to-earnings ratio of 32.5 times/27.5 times on FY24E/FY25E EPS.
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