L&T Technology Services shares fall 3% post tepid Q2  earnings 

Shares of L&T Technology Services fell in early trade today after the IT arm of L&T reported its earnings for the quarter ended September 2022. L&T Technology Services stock plunged 3.2 per cent to Rs 3,552 against the previous close of Rs 3,672.60 on BSE. Market cap of the firm fell to Rs 37,932 crore. The stock is trading higher than the 5 day, 20 day, 50 day and 100 day moving averages but lower than 200 day moving averages. 

Total 2727 shares of the firm changed hands amounting to a turnover of Rs 98.06 lakh on BSE. The stock hit its 52 week high of Rs 5,958.10 on January 4, 2022 and a 52 week low of Rs 2923.35 on July 4, 2022.

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However, the IT stock has lost 30 per cent in a year and plunged 36 per cent in 2022.  In a month, the L&T Technology Services stock has gained 7.49 per cent. L&T Technology Services logged a 22.7 per cent growth in consolidated net profit to Rs 282.4 crore for the September 2022 quarter against a net profit of Rs 230 crore in the corresponding period a year ago.

The consolidated revenue from operations of L&T Technology Services (LTTS) rose about 24 per cent to Rs 1,995 crore from Rs 1,607.7 crore in the September 2021 quarter. The company also declared an interim dividend of Rs 15 per equity share. 

The company's CEO and Managing Director Amit Chadha said the company has achieved annualised revenue run-rate of $1 billion (about Rs 8,000 crore) in constant currency terms. The company won a $60 million-plus deal in the second quarter, making it the third consecutive quarter of wins in the $50 to 100 million total contract value range for the transportation segment.

Financial services firm Motilal Oswal is bullish on the stock with a target price of Rs 4,230. 

The brokerage said, "Digitisation is driving the accelerated spends in ER&D and LTTS should benefit due to: 1) its strong capabilities, 2) multi-vertical presence, and 3) solid wallet share. We expect the company to deliver strong revenue growth over the coming years. We retain LTTS as our top pick in the Tier II IT Services space. We continue to view LTTS as a beneficiary of the growing penetration of ER&D Services and the best Tier II IT Services play within our coverage universe. We have not revised our estimates materially. We retain our BUY rating and value LTTS at Rs 4,230 (based on 32x FY24E EPS)."

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CLSA has maintained its sell rating on the stock with a target of Rs 3,200 per share.

The company's margin is holding but deal momentum has weakened. The FY23 CC revenue growth guidance implies a modest 2-3 per cent CAGR over H2, the brokeage said. 

Citi has kept the 'sell' call on the stock and cut target price to Rs 2,790 per share.

Revenue of the firm was in-line, while margin was ahead due to higher-than-expected rupee benefit.

The FY23 CC revenue growth guidance implies 1.1 percent QoQ growth for next two quarters, the international brokerage said. 

Sharekhan expects the deal win momentum to continue led by transportation vertical. At the current market price, the stock trades at 33.5x/30.3x/24x its FY2023/FY2024/FY2025 earnings, which looks reasonable, given healthy deal wins, continued growth momentum in its key transportation vertical, moderation of supply side pressure and reassuring management commentary.

"We maintain 'hold' rating on the stock with a revised price target of Rs 3,900, given its strong deal pipeline, steady ramp up of deal wins, continuation of strong performance in the transportation vertical and moderation of supply-side pressures," said  Sharekhan.