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MOSL: Morning India (5/December/19): 1. L&T Infotech (Bounce back on the horizon); 2. The Corner Office (Crompton: Focus on new product launches and higher ad-spends); 3. Bulls & Bears (Markets rally for third

MOrning India (5/December/19): 1. L&T Infotech (Bounce back on the horizon); 2. The Corner Office (Crompton: Focus on new product launches and higher ad-spends); 3. Bulls & Bears (Markets rally for third straight month); 4. Bharti Airtel; 5. Telecom

 

Today’s top research idea

L&T Infotech: Bounce back on the horizon

• Over past four years, LTI has continuously strengthened the moats around its business. Client specific issues, which led to muted performance over 9MCY19, now seem to be largely behind.
• Despite the cautious IT spending trend, recent large deal wins and client additions give us confidence of strong revenue CAGR (11%, USD) over FY19-21E.
• Lower exposure to disrupted horizontals and scale benefits should help partly negate vertical headwinds.
• As growth returns, utilization should increase by ~200bp, positively impacting margins. Multiples corrected ~27% from its peak on concerns related to key clients and immediate integration with Mindtree.
• As these are largely behind, we upgrade the stock to Buy. Our TP of INR2,030 implies 19x 1-year forward P/E, at 15% discount to TCS.

Piping hot news

Reliance Jio increases tariffs by up to 40%

Reliance Jio Infocomm raised its tariffs by nearly 40%, but some of its plans are almost 25% cheaper than those of rivals Bharti Airtel and Vodafone Idea, suggesting that the days of price war in the telecom sector may still not be over. The Mukesh Ambani-led telecom operator, which had started a tariff battle in the sector with its entry in 2016, has increased its headline price plans for the first time since its launch.