L&T Technology Services Shares Fall As Q3 Growth Takes A Hit
Attrition is likely to stabilise from Q4, CEO Amit Chadha says.
Shares of L&T Technology Services Ltd. fell the most in a month as lower working days and higher leaves weighed on growth in the third quarter.
The engineering services company reported a 4.2% sequential revenue growth in constant currency in the three months ended December compared with an average of 4.5% in the last six quarters.
India’s software services exporters usually face the seasonal impact of the yearend holiday season.
The company’s last 12 months attrition rose to 17.5% in the third quarter from 16.5% in the preceding three months. Attrition is likely to stabilise from the fourth quarter, and could come off to pre-pandemic levels over the next four quarters as well, Amit Chadha, managing director and chief executive officer, told BloombergQuint’s Niraj Shah in an interview. The company, Chadha said, will continue to hire more freshers and train them in its global centres extensively.
L&T Technology won three deals worth more than $10 million in the third quarter. That included a $45-million deal in the electric autonomous and connected vehicle segment—the third from the same client in as many quarters. Chadha expects another $10-million deal with the same client soon.
The deal momentum, according to the company, was soft because of slightly delayed closures, but healthy wins are expected in Q4.
Margin beat estimates in the third quarter. This is a “sweet spot” for margins, Chadha said. If margins were to improve, he would look to invest back in growth to stay in the high-teen growth path.
L&T Technology has retained its revenue guidance of 19-20% for FY22. According to Chadha, the target of billion-dollar revenue by second or third quarter of FY23 still stands on the back of higher execution and stronger deal wins.
Motilal Oswal remained optimistic on the company but cut earnings estimates. “We lower our FY22-24 EPS estimate by 1-2% due to the Q3 FY22 miss. We maintain our ‘buy’ rating and marginally tweak our target price to Rs 6,130 apiece (43x FY24E EPS).”
Dolat Capital said, “We remain confident that L&T Technology can deliver multi-year high-teens growth over the next few years with a stable profitability and deserves to command premium. We remain positive on the name but given the strong run-up, would prefer better entry points and thus assign ‘accumulate’ rating with discounted cash flow-based target price of Rs 5,320 (implies 40x FY24E).”
Shares of L&T Technology shed as much as 8.13% in intraday trade on Wednesday. Of the 27 analysts tracking the company, 11 maintain a ‘buy’, seven suggest a ‘hold’ and nine recommend a ‘sell’, according to Bloomberg. The 12-month consensus price target implies an upside of 2.3%.
The stock’s trading volume was nearly nine times the 30-day average volume at this time of the day.
Watch the full interview here: