Larsen & Toubro Infotech - Q1FY21 Result Update - ICICI Securities

Larsen & Toubro Infotech's (LTI) revenues were in line with our estimates while margins were marginally above our estimates. Although the company reported a revenue decline of 4.8% QoQ, it was relatively better than some of the larger peers that reported average 7.0% QoQ decline in revenues in Q1FY21. In addition, EBIT margins improved 70 bps to 17.4% (above our estimate of 16.8%) mainly due to absence of one-off expenses in the quarter, rupee depreciation and cost rationalisation. Further, despite a challenging quarter, the company closed a large deal of US$20 million.

Valuation & Outlook

In the near term, we expect the company to face headwinds in terms of pricing pressure, lower discretionary spend and delay in deal ramp ups. However, we expect LTI to see a revival in H2FY21E based on ramp up in deals won and recovery in troubled verticals. Further, the company has delivered strong double-digit revenue growth consistently, delivering industry leading growth, higher return ratios and is expected to do so post crisis. Hence, we remain positive on the stock from a long-term perspective. However, the recent run up in price factors in most of the positives. Hence, we downgrade the stock from BUY to HOLD with a revised target price of 2320/share (20x PE on FY22E EPS).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_LTInfo_Q1FY21.pdf

Shares of Larsen & Toubro Infotech Ltd was last trading in BSE at Rs.2262.6 as compared to the previous close of Rs. 2291.25. The total number of shares traded during the day was 27296 in over 7176 trades.

The stock hit an intraday high of Rs. 2304.95 and intraday low of 2214.2. The net turnover during the day was Rs. 61635188.

Source : Equity Bulls

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