L&T Technology Q2 Review - Weak Results, Implies Daunting Ask Rate For Guidance: Dolat Capital

Dolat Capital Report

L&T Technology Services Ltd. reported revenue of $307 million up 3.4% QoQ in constant currency (our estimate: +4.2%) led by ramp-ups in sustainability (+6.7% QoQ) and mobility segment (+4.8%). Operating profit margin declined by 50 bps QoQ to 15.1% (our estimate: 16.5%) due to incremental investment in Sales, Solutions and Labs.

Reiterated 8-10% CC Rev growth and 16% OPM for FY25E. Guidance at lower band implies an ask rate of 4.3% CQGR for Q3/Q4, while OPM guidance appears ambitious given impending wage hike in Nov-24. Nonetheless, management expressed confidence in achieving it.

Commentary on deal pipeline conversion remains strong, but margin recovery remains protracted. We broadly retain our estimates with management’s confidence in achieving the guidance and believe most of positives are well priced-in, but not the risks.

Maintain ‘Sell’ rating with target price of Rs. 4,800 at 28 times on FY27E (implies 2.5 times PEG basis).

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