L&T Technology Services shares rise 9% post Q4 earnings; buy, sell or hold?

Shares of L&T Technology Services zoomed nearly 9% today after the subsidiary of L&T reported a 18% rise in Q4 net profit to Rs 309.60 crore. Net profit in the corresponding quarter of the previous fiscal stood at Rs 262 crore. L&T Technology Services zoomed 8.7 per cent to Rs 3,748 against the previous close of Rs 3447.95 on BSE. Market cap of the firm rose to Rs 39,216 crore.  

Total 0.67 lakh shares of the firm changed hands amounting to a turnover of Rs 24.52 crore on BSE. The stock hit its 52 week high of Rs 4,316.75 on  December 2, 2022 and a 52 week low of Rs 2923.35 on July 4, 2022.  

In terms of technicals, the relative strength index (RSI) of the stock stands at 47, signaling it's trading neither in the overbought zone nor in the oversold zone. L&T Technology Services shares have a beta of 1.4, indicating high very volatility in a year. L&T Technology stock is trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.  

L&T Technology Services reported a 195 rise in total revenue at Rs 2,096.2 crore against Rs 1,756.1 crore in the corresponding period of the preceding fiscal. The company's earnings before interest and tax (EBIT) increased 2.6 percent quarter-on-quarter to Rs 392.7 crore from Rs 382.9 crore. EBIT margin came flat at 18.7 percent in the March quarter. 

During the quarter, LTTS won a $40-million deal and three $10-million plus TCV deals. Also, LTTS’ employee strength stood at 22,233 in the March quarter. 

At the end of the fourth quarter, the patents portfolio of the company stood at 1,090, out of which 727 are co-authored with its customers, and the rest are filed by LTTS.  

Motilal Oswal has retained its buy call on the firm, raising the target price to Rs 4040. The new target amounts to an upside of 17% from the previous close of Rs 3348.  

“Valuations have corrected sharply over the last one year and are now at 22x FY25E EPS, which we see as attractive due to a better outlook for the ER&D services industry compared to the broader IT services universe. We continue to view LTTS as a beneficiary of the growing penetration of ER&D Services. We raise our FY24-25 EPS estimates by 3% on account of a good Q4 performance and retain our BUY rating on the stock. We value LTTS at INR4,040 (premised on 26x FY25E EPS),” the financial services firm said.  

YES Securities maintained its reduce rating on the firm with a target price of Rs 3,678. 

"L&T Technology Services reported inline financial performance for the quarter. Both, the sequential revenue growth and EBIT margin came in as per expectation. We estimate a revenue CAGR of 18.0% over FY23-25E with an average EBIT margin of 17.5%. We roll over to FY25E estimates and maintain our 'Neutral' rating on the stock with a revised target price of Rs 3,678/share at 25x on FY25E EPS," it said. 

Choice Broking lowered its rating to 'Add' with a target price of Rs 3,738 (Earlier: Rs 4,400). 

"The management’s commentary demonstrates its confidence in a strong demand environment. It foresees a robust deal pipeline in the US, Europe and the Middle East, driving growth going forward, and has re-affirmed its target revenue run rate of $1.5 Bn by FY25," it said. 

"We expect LTTS to achieve their target with a slightly deteriorating margin profile. Hence, we have modified our estimates and arrived at a DCF-based target price of Rs.3,738 (from Rs 4,400 earlier), implying a 28x multiple on FY25E EPS of Rs.134, and downgrade our rating to Add," it added. 

 

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