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Motilal Oswal
L&T Infotech (Neutral)
Target: ₹3,910
CMP: ₹4093.10
In our view, L&T Infotech is in an enviable position – it benefits from its position as a company with enough scale to compete with larger players, but is still small enough to leverage the array of small deals to grow ahead of its peer group.
LTI also has a well-diversified portfolio of service lines – ADM, ERP and IMS contribute 36 per cent, 31 per cent and 14 per cent, respectively, to total revenues. It has a good presence in all the major verticals, with BFS contributing 30 per cent to total revenues. The combination of a size- and industry-relevant portfolio has helped the company win deals (large deal pipeline of $1.9b) across service lines and geographies. LTI has clocked a 16.3 per cent revenue CAGR in the past three years, among the highest in the IT Services pack.
Aligning itself with customers’ digital transformation initiatives, LTI has structured its executive focus on cloud and data products. This, along with a capable sales team, has allowed it to both mine existing accounts as well as hunt for new accounts (beyond the Top 20 clients).
While we remain confident of the company’s execution capabilities, we downgrade the stock to Neutral, led by the recent rally in stock price (130 per cent in one year).
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