MOSL: L&T INFOTECH (Buy)-Strong visibility on continued outperformance-Analyst Day Takeaways

​L&T INFOTECH: Strong visibility on continued outperformance; Analyst Day Takeaways

(LTI IN, Mkt Cap USD2.9b, CMP INR1064, TP INR1200, 15% Upside, Buy)

• We attended L&T Infotech’s (LTI) Analyst Day in Mumbai, where the company highlighted (i) its readiness on Digital offerings, (ii) efforts undertaken to align its delivery and (iii) the growth engines needed to continue exhibiting industry leading growth rates. Appended below are our key takeaways from the event:
  
• Continued leadership on growth rates: LTI has led industry growth over the past on account of a high composition of Digital revenue (32% of total), superior client mining abilities (75% of incremental growth over the last three years, led by top 20 accounts) and timely investments in the business. Positioning because of progress on all these vectors has been favorable, leading to continued expectations of revenue growth pick-up in FY18 and positive momentum in FY19.
  
• Supported by strong visibility: Visibility for continued outperformance for LTI comes from [1] the uptick it has seen in large deal wins, TCV of which over the last six quarters has totaled USD300m, [2] strong deal pipeline, 59% of which is in proposal stage, 36% is Digital and 20% is with new logos, [3] the addition of 65 new logos in the last 12 months, many of them being in the USD1m+ bracket and [4] significantly higher growth than industry average in four verticals (59.5% of revenue) and four service lines (53% of revenue).
  
• Steady outlook on margins led by investments…: LTI maintained its target net profit margin band of 14-15%, despite the strong revenue outlook. Performance on margins is being capped because of a calibrated investment approach taken by the company. Prioritizing growth, LTI has been investing heavily in augmenting its offerings and fueling its sales/marketing engines. Levers for maintaining stability at the operating level are in the form of higher digital revenue, operational excellence, cost optimization and prudent risk management.