Prabhudas Lilladher is bullish on Larsen and Toubro Infotech has recommended buy rating on the stock with a target price of Rs 2421 in its research report dated July 17, 2020.
Prabhudas Lilladher's research report on Larsen and Toubro Infotech
LTI reported CC de-growth of 4.7% QoQ exact in line with our estimates. LTI surprised on margins expanded 71bps QoQ to 17.4% (Ple:17%, Cons: 16.8%) led by 11% QoQ SG&A, lower travel costs & higher proportion of offshore revenue (up 170 bps QoQ). Revenue decline was led by manufacturing (-16% QoQ) & Energy (-11% QoQ). Limited exposure to travel , hospitality and retail limited the revenue decline. Management guided Q1FY21 was trough & Q2FY21 will be flat or up QoQ & recovery will happen in 2HFY21. LTI bagged one large deal and solid execution in US just a 2.2% QoQ decline in Q1. No client-specific challenges (discount given) in its top accounts, stable client metrics, client additions and ramp-ups in past deals will lead strong recovery in 2HFY21E.
Outlook
We increase our EPS estimates by 2.2% for FY22E/FY23E & now value LTI at 21X to arrive at changed target price of Rs.2421(Earlier: Rs.1894) on Sep-22 EPS of Rs.115. LTI is currently trading at 21.3x/18.6x earnings multiple. Upgrade to Buy from HOLD. Valuation to remain premium.
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