Larsen & Toubro Infotech Ltd - Q3FY21 First Cut - ICICI Direct

(CMP - Rs. 4093, Mcap - Rs. 71,483 crore)

Larsen & Toubro Infotech (LTI) reported a healthy set of Q3FY21 numbers both on revenues and margins front. The company's constant currency dollar revenues increased 5.3% QoQ (above our estimate of 5.0% QoQ) and margins increased by 35 bps QoQ to 23.2% (vs our estimate of 22.9%) mainly led by higher offshoring (up 220 bps QoQ) and increase in utilization (up 210 bps QoQ). Digital (44% of revenues) grew 9.5% QoQ and 17.5% YoY. The growth in constant currency revenues was mainly driven by banking financial services (up 7.5% QoQ), manufacturing (9.2% QoQ), High-Tech, Media & Entertainment (up 5.8% QoQ), and others (up 10.8% QoQ). The growth in verticals was across except Insurance & Energy & Utilities which were down marginally by 1.0% QoQ and 0.3% QoQ, respectively. In terms of geographies growth was led by North America (up 4.4% QoQ) and Europe (up 3.9% QoQ). The company has also won two large deals with cumulative net new TCV of US$278 million. The company's large deal pipeline remains strong and the company is seeing increased traction in cloud-based IT solutions.

Q3FY21 Earnings Summary

- Constant currency (cc) revenues grew 5.3% QoQ and 7.4% YoY. Dollar revenues grew 5.8% QoQ to US$427.8 million, above our expectations of 5.5% QoQ growth and US$426.7 million.

- Rupee revenues grew 5.1% QoQ to Rs. 3152.8 crore (vs. our estimate of Rs. 3,149.4 crore).

- EBITDA margin expanded 35 bps QoQ to 23.2% (vs. our estimate of 22.9%) mainly led by 11 bps QoQ increase in gross margins (led by higher utilisation up 210 bps QoQ and increase in offshoring up 220 bps QoQ) and operating leverage.

- Reported PAT came in at Rs. 519.3 crore (vs. our estimate Rs. 491.6 crore) mainly led by better performance at operating level and higher other income.

The company has reported a strong revenues growth above its mid cap and large cap peers. In addition, the company has reported healthy margins. We expect this improving trajectory in revenues to continue in coming quarters. We would be revisiting our estimates and target price post the conference call tomorrow.

Shares of Larsen & Toubro Infotech Ltd was last trading in BSE at Rs.4093.1 as compared to the previous close of Rs. 4015.6. The total number of shares traded during the day was 12873 in over 3194 trades.

The stock hit an intraday high of Rs. 4168 and intraday low of 3814.8. The net turnover during the day was Rs. 52890679.

Source : Equity Bulls

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