MOSL: L&T INFOTECH (Buy)-Stable revenue growth and positive outlook
​L&T Infotech: Stable revenue growth and positive outlook
(LTI IN, Mkt Cap USD1.9b, CMP INR733, TP INR850, 16% Upside, Buy)
- Broad-based growth: LTI’s 4QFY17 revenue grew 2.4% QoQ in constant currency (CC) terms, against our expectation of 1.3%. Revenue growth was broad-based across verticals and geographies. For FY17, CC growth of 10% was at the higher end of the industry. The year was marked by stabilization of the Energy vertical and 8.4% growth in BFS despite this being a pressure-point for the industry.
- Positive outlook on healthy momentum: Heading into FY18, this momentum is expected to continue, led by: [1] sharp pick-up in BFS, driven by incremental deals from the top client, [2] stability in Energy, [3] robust new deal wins that will ramp up over 1HFY18, and [4] continued momentum in Digital, which is 28% of revenue.
- Profitability marginally below estimate: Despite seasonality, higher SGA (+60bp to 16.8%) and INR appreciation, LTI’s EBITDA margin expanded by 90bp QoQ to 19% against our expectation of 20bp expansion to 18.3%. Margin expansion was partly led by some accrual accounting at the year-end around employee leaves. However, with confidence of revenue growth and multiple traditional levers in hand, there appears limited risk to our assumption of a cumulative 80bp decline in margins over FY18-19. PAT at INR2.5b (+2.7% QoQ) was higher than our estimate, led by operational beat and higher other income.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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