Should You Buy Or Hold L&T Infotech (LTI) After Its Q2 Results?

Earlier this week, L&T Infotech (LTI) reported a 26.7 percent increase in consolidated net profit of Rs 456.8 crore for the September ended quarter against the net profit of Rs 360.4 crore in the same period a year ago.

The company's revenue grew 16.6 percent to Rs 2,998.4 crore during the quarter from Rs 2,570.7 crore in the year-ago period.

LTI announced a large deal with net new TCV (total contract value) in excess of $40 million in analytics. The company's large deal pipeline remains strong and it sees increased traction in digital, cloud and analytics space, said CEO and MD Sanjay Jalona commenting on the quarterly performance.

He also pointed out that the pandemic "has made it apparent that organisations need to reimagine their target operating models embracing digital transformations to remain relevant in the marketplace."

This presents tremendous opportunities for companies like LTI with comprehensive digital transformation capabilities, he added.

LTI's board also declared an interim dividend of Rs 15 per equity share.

As of 10 September, promoters held 74.4 percent stake in the company, while FIIs (Foreign Institutional Investors) held 11.2 percent, DIIs (Domestic Institutional Investors) 6.4 percent and public and others held 8 percent.

Shares of LTI were trading close a percent higher on Friday.

Should you 'buy' or 'hold' LTI?

Here's what brokerage said after its Q2 financial results:

Sharekhan has maintained a 'buy' rating on LTI with a price target of Rs 3,500 on the expectation of industry-leading growth momentum post-COVID-19.

"Q2 numbers beat expectations on all fronts, along with a robust deal pipeline and strong OCF generation; margin improvement remained impressive. Both the digital and core business grew 18.4% and 6.3% y-o-y. Management indicated that Q3FY2021 revenue would surpass revenue seen in Q4FY2020; we believe that the company would comfortably beat guidance given prudent client mining, continued growth in top account and superior execution," the brokerage said.

"Consistency in deal wins, must-have logos and prudent client mining would help company outperform peers over the next few years. We expect LTI's USD revenue/earnings to clock a CAGR of 15%/18% over FY2020-FY23E," it added.

Dolat Capital Market said "accumulate" L&T Infotech with a target price of Rs 3,250.

"We remain confident that LTI should continue its industry leading performance over next few years with a very-stable Net profitability (reinvest Fx/realization gains back into business). We have factored in a 14% revenue/earnings CAGR over FY20-23E with an Accumulate rating and TP of Rs. 3,250, valuing it at 25x FY23E EPS of Rs 130," the brokerage said.

Motilal Oswal has given a 'buy' rating to LTI with a target price of Rs 3,480.

The brokerage has upgraded FY21/FY22 EPS estimates by 7%/11% as it adjusts to the margin surprise in the quarter. As digital becomes mainstream, it expects LTI to benefit from continued investments in digital capabilities, strong client additions, and mining abilities.

ICICI Securities has upgraded its rating on the stock from 'hold' to 'buy'.

"LTI is expected to be a key beneficiary of recent trends of multi-year technology transformation phase. In addition, the company's ability to win large deals, effectively mine clients, adding Fortune 500 clients and acquire new clients will enable it to deliver industry leading revenue growth in coming years. This, coupled with a healthy margin performance prompt us to revise our EPS estimates upwards. Hence, we upgrade the stock from HOLD to BUY with a revised target price of Rs. 3,570 (24x FY23E EPS)." it said.

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