MOSL: L&T INFOTECH (Buy): Top client rebound and encouraging deal wins are key positives
(LTI IN, Mkt Cap USD4.8b, CMP INR1933, TP INR2260, 17% Upside, Buy)
Continue expecting industry leading growth; Reiterate Buy
** Robust growth in the top account alleviates concerns around client-specific issues. Besides, strong/broad-based client addition across buckets and encouraging deal wins will likely translate into industry leading growth. We see further scope for margin expansion driven by better utilization.
** We upgrade our EPS estimate by ~6% for FY20-22, given the large deal win momentum and the decent outlook in the top client. Reiterating Buy.
Strong beat on revenue growth and margins
** Revenue increased 14.2% YoY (our estimate: +10.2%), EBIT margin came in at 16.2% (our estimate: 15.7%), while PAT growth was stagnant (our estimate: -3%). Organic revenue excl. pass-through increased 6.4% QoQ CC.
** Growth was broad-based across most verticals and service lines. The uptick in spends at the top client, combined with a few large deal ramp-ups among top-10 clients, is the key growth driver.
** Growth in Europe (+1.8% QoQ CC) was surprisingly soft, despite the ramp ups of a few large deals in this region.
** EBIT margin expanded ~70bp QoQ, largely driven by operating leverage, higher utilization and currency benefit. Key margin headwind was lower margins associated with pass-through revenue.
** In line with the industry trend, attrition moderated by 70bp to 17.7%.
** DSO (including unbilled) increased by five days QoQ.
** Deal win momentum continued with net new TCV of USD75m.
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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