MOSL: L&T INFOTECH (Neutral)-Growth momentum intact-transient sluggishness in few top clients
L&T INFOTECH: Growth momentum intact; transient sluggishness in few top clients
(LTI IN, Mkt Cap USD4.4b, CMP INR1801, TP INR1950, 8% Upside, Neutral)
- Continues to lead the pack in growth: LTI reported robust 3QFY19 results with revenues up 20.6% YoY constant currency (CC) (estimate of 18.1%). EBITDA jumped 58.3% YoY (estimate of 52%) and PAT grew 32.7% YoY (estimate of 23.4%). On a QoQ basis, growth in CC was 6.1% QoQ and ~5.1% in USD terms, excluding the hardware pass-through in the India deal present in this quarter. EBITDA margin expanded 10bp QoQ to 20.6%, a beat of 60bp, led by lower SGA (-40bp QoQ). PAT at INR3.75b was a 7.6% beat - mainly led by better operating profits and lower forex loss (INR60m v/s estimate of INR208m). For 9MFY19, constant currency revenue growth stands at 22.2%, EBITDA growth is 57% and PAT growth is 38%.
- Broad-based, in tune with recent quarters: Growth during the quarter was driven by CPG/Retail/Pharma (10.4% QoQ CC), followed by Manufacturing, E&U and Hi-tech/M&E (all segments grew by 6.7-7.9% QoQ CC). In Services, Enterprise Solutions stole the show growing +17.2% QoQ CC. But, growth from top-5 clients was relatively muted at 0.6% QoQ.
- Activity and pipeline remain strong, but transient slowness in few top clients: LTI cited that Nets, the leading payments company in the Nordic region has chosen LTI as its primary IT partner post vendor consolidation. This is expected to become a significantly large engagement. Also, there are pockets of tightness in some specific customers in the top-5. LTI believes these are temporary in nature.
Larsen & Toubro Infotech Limited is an India-based company, which is engaged in computer programming, consultancy and related activities. The Company's business segments include Industrials Cluster and Services Cluster. The Industrials Cluster segment consists of the business verticals of energy and process, consumer packaged goods, retail and pharmaceuticals, hi-tech and consumer electronics, automotive and aerospace, plant equipment, and utilities, engineering and construction. The Services Cluster segment consists of the business verticals of banking and financial services, insurance, media and entertainment, travel and logistics, and other miscellaneous business verticals. The Company offers a range of services, such as Analytics & Information Management (AIM), Consulting, Internet of Things, Applications Management, Enterprise Integration, Industrial Internet of Things, System Integration, Assurance Services, Geographical Information System (GIS) and Infrastructure Management.
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