MOSL: L&T INFOTECH (Buy)-Visibility of mid-teen growth-driven by broad-based momentum
L&T Infotech: Visibility of mid-teen growth; driven by broad-based momentum
(LTI IN, Mkt Cap USD3.3b, CMP INR1223, TP INR1400, 15% Upside, Buy)
- All-round beat: LTI saw revenue growth of 8.5% QoQ, defying seasonal weakness. Even if were to exclude pass-through revenue (2.2%) and integration of recently acquired Syncordis (0.7%), growth of 5.6% QoQ was above our estimate. EBITDA margin of 17.1% expanded by 30bp QoQ (a beat of 30bp), as the company more than offset the negative impact of pass-through and currency using utilization and SGA optimization. PAT at INR2.8b (+3.6% QoQ) was ahead of our estimate, led by the operational beat.
- Broad-based growth encouraging: The growth LTI has seen over the last nine months has been well spread across verticals, with most of them growing in double-digits YoY: BFS (21%), Energy (22%), CPG, Retail & Pharma (29% YoY) and Hi-Tech, Media & Entertainment (29%) – together these constitute ~60% of revenue. Even among client buckets, growth momentum was uniform: top 5/10/20/others grew by 15/13/12/21% YoY.
- Deal wins keep visibility intact: LTI has grown 15% YoY in 9MFY18, and given expectations of continued momentum in 4Q, should clock 16% growth in FY18. The strong exit rate would also lead to mid-teen growth for FY19E without much of an ask rate (required CQGR of 2.5% in FY19E v/s 4.4% in FY18). Ramp-up of the two large deals announced in the previous quarter lend visibility of a growth pick-up in FY19.
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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