Stocks

Broker's call: L&T Technology (Add)

| Updated on October 21, 2020 Published on October 22, 2020

Centrum Broking

L&T Technology (Add)

Target: ₹1,825

CMP: ₹1698.25

L&T Technology Services (LTTS) has delivered steady Q2-FY21 with modest revenue and margin beat. PAT was 21 per cent higher than our estimates led by higher other Income owing to export Incentive Income.

Post steady Q2-FY21, we expect LTTS USD revenues to grow/(decline) by (7.9)/14.8 per cent for FY21/FY22 ( vs (9)/14 per cent modelled earlier). Organic Revenue decline would be 8.8 per cent for FY21 and Orchestra acquisition consolidated from October 2020 is inorganic component.

We raise FY21 EPS estimates by 4 per cent led by Q2-FY21 PAT beat. However, we retain FY22/FY23E EPS estimates. Stock trades at 24x FY22 EPS and 21.3x Sept 22 EPS. With commentary on turnaround picking, multiples can re-rate.

We now value LTTS at 22x Sept 22 EPS which yields a TP of ₹1,825/share. This represents a 18 per cent upgrade in TP led by P/E upgrade. Engineering Design business gets premium multiples and LTTS is the only pure play E&RD company with multi vertical expertise.

With worst behind, we see P/E multiple expansion as business upturn in expected in FY22.

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on October 22, 2020
This article is closed for comments.
Please Email the Editor