The Economic Times daily newspaper is available online now.

    Hold L&T Infotech, target price Rs 1,823: Axis Securities

    Synopsis

    With depreciation in rupee, lower travel cost, lower onsite expenses, EBITDA margins are likely to expand in the near term. However, near term uncertainties may impact near term.

    Buy-sale15ThinkStock Photos
    Axis Securities has given a hold rating to L&T Infotech with a target price of Rs 1,823 based on 17 times P/E multiple to its FY22E earnings of Rs 106.3 per share.

    According to the brokerage, the management sees short term uncertainty in all the major verticals like BFSI, Retail and Manufacturing across geographies in the near term. However it is confident of gaining back the growth trajectory in the second half of FY21.

    L&T Infotech Ltd reported strong broad-based growth in the fourth quarter of FY20. Revenue stood at Rs. 3,012 crore, up 21.2 per cent year on year and 7.1 per cent quarter on quarter. Operating profit showed a growth of 19.1 per cent quarter on quarter at Rs. 648 crore while operating margin stood strong at 19.2 per cent showed a growth of 40 bps quarter on quarter. Net profit for Q4 FY20 stood at Rs.427.5 crore, reporting a growth of 13.5 per cent quarter on quarter. Total large deal wins for the year stood at eight.

    Investment Rationale

    The brokerage believes L&T Infotech has a resilient business structure from a long term perspective and multiple long term contracts with world’s leading brands. With depreciation in rupee, lower travel cost, lower onsite expenses, EBITDA margins are likely to expand in the near term. However, near term uncertainties may have impact.
    Although there are near term challenges to growth owing to Covid-19, the brokerage believes in the company’s track record of delivering profitable growth in tough environments, thereby reaffirming its confidence in the management’s ability to deliver in the longer term.

    The brokerage points out that the manufacturing vertical of the company grew 7.2 per cent quarter on quarter. Hi Tech Media & Entertainment grew by 6.3 per cent quarter on quarter, E&U grew by 4.9 per cent. Financial Services grew by 2.9 per cent quarter on quarter, CPG Retail& Pharma grew by 3.3 per cent. Insurance declined by 1.3 per cent quarter on quarter due to one-time settlement. Enterprise Solution business grew by 8.8 per cent quarter on quarter, IMS business reported growth of 13.3 per cent quarter on quarter, ADM & Testing grew marginally at 0.6 per cent quarter on quarter, Analytics AI &Cognitive and platform base solution services declined by 6.2 per cent and 4.2 per cent quarter on quarter respectively. On geographical front, North America (69 per cent of revenue) showed a growth of 3.1 per cent quarter on quarter, Europe (15 per cent of revenue) grown marginally by 0.8 per cent quarter on quarter, ROW business grew by 15 per cent quarter on quarter.

    Financials

    For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 3011.90 crore, up 7.14 per cent from last quarter sales of Rs 2811.10 crore and up 21.15 per cent from last year's same quarter sales of Rs 2486.00 crore. The company reported net profit after tax of Rs 427.50 crore in the latest quarter.

    Promoter/FII Holdings

    Promoters held 74.53 per cent stake in the company as of March 31, 2020, while FIIs held 9.46 per cent, DIIs 7.19 per cent and public and others 8.81 per cent.



    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more


    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
    The Economic Times

    Stories you might be interested in