ICICI Direct’s research report on Larsen and Toubro Infotech
L&T Infotech (LTI) (a subsidiary of India’s large conglomerate Larsen & Toubro) is among top 20 global IT service company and sixth largest Indian IT company. The key drivers of the company’s growth have been winning large deals, new logos, client mining and its continuous efforts to drive the same. This is visible in LTI’s financial performance wherein revenues and PAT have grown at a CAGR of 13% and 15%, respectively, over FY16-18.
We expect LTI to witness healthy double digit revenue growth of 16.7% CAGR in FY18-21E in dollar terms with stable EBITDA margins of 19.3% and net profit margins of 15% in FY21E. Thus, we initiate coverage on the stock with a BUY recommendation and a target price of Rs 1950/share based on 18x FY21E EPS. In our view, our target multiple for LTI is justified considering the robust growth trajectory implying a PEG ratio of 0.8x and strong return ratio (RoCE – 34.4% in FY21E).
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First Published on Mar 26, 2019 03:51 pm