BofA Global Research has double-upgraded L&T Technology Services Ltd. with a 'buy' rating from 'underperform' as it sees an uptick in deal wins.
The rating comes after an in-line third-quarter revenue performance. There are a few reasons that back the upgrade that include deal wins, earnings and acquisitions.
Deal Wins And Earnings
"Record deal wins in the quarter alongside expectations of a similar quantum in the fourth quarter suggests the start of the pay-off phase to us," the brokerage said.
BofA cites its chief concern to be the risk coming from slowing engineering, research and development spending by the transportation and mobility sector.
The comments from the firm and other earnings so far suggest that this is now just confined to the sub-segment of autos, while trucks, rail and off-highway are starting to accelerate, according to the brokerage.
Acquisitions
The acquisition of Intelliswift increases the addressable market size by way of expansion potential into retail, fintech and healthcare sectors, according to BofA.
"We like the acquisition of Intelliswift as it marks company's foray in services economy customers vs. traditional forte of manufacturing sector. Intelliswift is exposed to the end market of cloud software and counts four of the top five cloud companies as key customers," it said.
The company's acquired capabilities can also help seed presence in retail, healthcare and fintech verticals that is likely to be construed as a favoruable diversification, according to BofA.
As per LTTS, hi-tech segment is starting to see higher spends on the back of Al initiatives, sustainability is benefiting from investments in industrial automation.
Broader overview of outlook suggests that constrained spending now applies chiefly to autos and semiconductor verticals, which is estimated at 25% of revenue by the brokerage. Client spending for the remainder 75% of business is expected to see a fast-paced recovery during the first half of this year.
Revised Rating
BofA raised its financial year 2026–27 earnings-per-share estimate by 7–13%. It also lifted the original revenue growth forecast to 14% CAGR over financial year 2025–27.
The brokerage also raised the target multiple to 36 times from 32 times and 10% premium to year average, given improving outlook for a new purchase order of Rs 6,200 with 20% potential upside. This is on account of the uptick in new wins coming through in all three segments of mobility, sustainability and hi-tech, as witnessed in the third quarter.
LTTS' stock rose as much as 3.35% during the day to Rs 5,420 apiece on the NSE. It was trading 2.18% higher at Rs 5,358 apiece, compared to a 0.37% decline in the benchmark Nifty 50 as of 1 p.m.
It has fallen 3.27% in the last 12 months. The total traded volume so far in the day stood at 3.5 times its 30-day average. The relative strength index was at 65.33.
Eleven out of the 30 analysts tracking the company have a 'buy' rating on the stock, eight recommend a 'hold' and 11 suggest a 'sell', according to Bloomberg data. The average of 12-month analysts' price targets on the stock is Rs 5,156, implying a downside of 3.9%.
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