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Elara Capital
L&T Infotech (Buy)
CMP: ₹1,777.45
Target: ₹2,160
L&T Infotech revenue at $346.9 million was up 5.6 per cent q-o-q (310 bp above our expectations) and 6.1 per cent q-o-q in CC terms. Growth was broad-based with incremental revenue across all verticals in the range of $2.3-3.5 million. L&T Infotech continues to mine accounts and move them up the client tiers and continues to add new logos with significant potential, including Fortune-500 firms. Management attributed their continued growth to their focus on “fewer verticals, fewer customers and fewer capabilities” and suggested this has helped them in wins against much larger peers.
Valuation: Despite forex translation losses and hedging losses this quarter that resulted in the first quarter of net forex losses for L&T Infotech’s since listing, net income margin was 15.2 per cent, 20 bp ahead of the firm’s targeted 15 per cent level with its hedging strategy. We increase dollar revenue estimates by 0.9 per cent for FY19, 1.6 per cent for FY20 and 1.7 per cent for FY21. We increase EBITDA estimates by 2.0 per cent, 3.3 per cent and 0.4 per cent for FY19, FY20 and FY21 respectively. We increase our PAT estimate by 0.5 per cent for FY19 and 1.3 per cent each for FY20 and FY21.
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