Shares of L&T Technology Services (LTTS) jumped 19 percent to hit their fresh record high of Rs 3,465 on BSE in intraday trade on July 15, a day after the technology firm reported an 84.5 percent year-on-year (YoY) jump in its June quarter net at Rs 216.2 crore.
The engineering and research and development services arm of the infra major L&T posted a net profit of Rs 117.2 crore in the year-ago period.
Its overall revenue increased by 19.42 percent YoY to Rs 1,562.6 crore for the reporting quarter, while the operating profit widened 5.20 percent to 17.3 percent, its highest ever.
Apart from the numbers, the revenue growth guidance boosted investor sentiment. The company has upped its revenue growth guidance to 15-17 percent in FY22 as against the earlier 13-15 percent.
Most brokerage firms remain positive on the stock after the June quarter numbers.
Brokerage firm Motilal Oswal Financial Services maintained a “buy” call on the stock with a target price of Rs 3,380.
“While LTTS has delivered largely flat growth over FY19-21 (1 percent revenue CAGR), due to COVID-19 and ramp down at key clients (partly due to external issues), we expect a strong growth rebound (18 percent CAGR over FY21-23E),” Motilal Oswal said.
“After a sharp (200bp) dip in the margin in FY21, due to the COVID-led impact, it should more than be able to recoup margin over the next two years on a favorable operating leverage, leading to 32 percent earnings CAGR over FY21-23E,” said Motilal Oswal.
The brokerage firm expects improved industry spends compared to the preceding five years and said its target price of Rs 3,380 per share implies an FY23E EPS of 31 times.
Edelweiss Securities, too, has a “buy” call on the stock and raised the target price to Rs 3,991 from Rs 2,994.
“We believe the momentum is likely to sustain for the remaining year, which will help LTTS deliver growth even higher than the top-end of its guidance. Hence, we are raising the target price as we increase target multiple to 35 times from 30 times, along with valuation rollover to Q3FY23E,” Edelweiss said.
Brokerage firm Phillip Capital maintained a “neutral” call, with a target price of Rs 2,620. The brokerage firm said it liked the stock but underscored that the scrip looked expensive at this juncture.
“We continue to like LTTS as a fundamentally strong business. However, the stock has run-up sharply and is now trading at 30 times FY23 PE–one of the most expensive stocks in the sector–and that too for a discretionary spend dependent ERD business,” said Phillip Capital.
“Strong results and deal flow led to the company upgrading its FY22 revenue growth guidance to 15-17 percent, slightly better than expected. Growth was broad-based with industrial as well as transport verticals growing smartly,” Phillip Capital said.
The brokerage firm said the company is now back to its Q3FY20 revenue level, having traversed a perfect V-shaped fall and recovery over the last five quarters. Over this period, the nature of the business has become much more digital and so has the client spend.
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