3 May 2021
4QFY21 Results Update | Sector: Technology
L&T Technology
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Financials & Valuations (INR b)
Y/E Mar
2021 2022E
Sales
EBIT Margin (%)
PAT
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
Ratios
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div Yield (%)
44.5
8.4
27.3
0.8
33.1
7.3
20.5
0.9
26.8
6.2
16.2
1.1
21.2
16.2
35.0
23.7
18.5
30.0
25.0
19.7
30.0
54.5
14.5
6.6
62.8
(19.0)
330.8
63.5
16.7
8.9
84.4
34.4
385.1
CMP: INR2,797
TP:INR 3,130 (+12%)
Upward revisions likely on the guidance front
LTTS IN
106
293.8 / 4
3062 / 1066
5/50/82
532
Buy
Improving demand outlook and long growth trajectory are key drivers
LTTS reported 3.8% QoQ CC growth in 4QFY21, missing our estimate by
150bp. While segments like Plant Engineering (+9.9% QoQ, large deal ramp
up) and Transportation (+6.6% QoQ) did well, Telecom and Hi-Tech and
Medical Devices were flat QoQ. EBIT margin improved 140bp QoQ,
benefiting from better utilization and offshore mix.
The company continues to do well on the deal front, adding six large deals
(over USD10m), with two deals with a TCV of over USD25m. The
management expressed its confidence on the deal pipeline, which has a
good mix of smaller and larger deals, helped by a return to normal decision
making cycle in the US and Europe.
LTTS provided an initial FY22 USD revenue growth guidance of 13-15%. The
management attributing the modest guidance to their increased caution due
to the recent COVID-19 cases in India. While we are disappointed by the
guidance (our initial estimate was of mid-to-high teens), we see meaningful
scope for an upward revision as we progress through the fiscal.
With strong demand commentary across industries and key regions, and
capability to deliver services during the lockdown, LTTS should not see
meaningful disruption in the business. We bake in 17.5% revenue growth for
FY22E, partially on account of a favorable base.
We expect margin to remain rangebound from current levels in FY22 as the
wage hike and investments should offset a gradual improvement in
operating metrics. Given the low base of FY21, we factor in a 310bp EBIT
margin improvement over FY21-23E.
We see LTTS as a key beneficiary of growing tech adoption in ER&D, which
should grow by ~2x that of IT Services over FY18-23E. Moreover, with Digital
at 50% of revenue, it should also benefit from 18% growth in Digital ER&D
spends over this period. We have built in 17%/29% revenue/EBIT CAGR over
FY21-23E. We value the stock at 30x FY23E EPS.
Maintain BUY.
Revenue miss but margin in line; FY22 initial guidance below our estimate
In USD terms, revenue grew 1% YoY (v/s our estimate of 2.7%), operating
profit grew 9.3% (v/s our expectation of 10.6%), and PAT fell 5% (v/s our
expectation of being flat) in 4QFY21. The same declined 6.2%/15%/19% YoY
in FY21.
Revenue rose 3.9% QoQ (v/s our estimate of 5.6%) to USD197.5m in
4QFY21. In constant currency, the same was up 3.8% QoQ, but flat YoY.
During 4QFY21, LTTS won six deals with a TCV of over USD10m, which
includes two deals of over USD25m.
Revenue from Digital and leading-edge technologies stood at 52% in
4QFY21.
The management guided at USD revenue growth of 13-15% in FY22.
EBIT margin improved 140bp QoQ to 16.6% (in line) in 4QFY21 despite an
80bp increase in SGA expenses.
2023E
75.2
17.6
11.0
104.3
23.5
452.2
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Mar-21 Dec-20 Mar-20
74.2
74.3
74.6
6.4
6.4
4.9
9.1
8.9
8.4
10.3
10.5
12.1
FII Includes depository receipts
Mukul Garg– Research analyst
(Mukul.Garg@MotilalOswal.com)
Research analyst: Anmol Garg
(Anmol.Garg @MotilalOswal.com) /Heenal
Gada
(Heenal.Gada@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.