L&T Technology Stock Hits Record High On $1-Billion Revenue Target
Shares of L&T Technology Services Ltd. jumped to a record high as analysts expect a rebound in global engineering, research and development spending, and increased pace of digitisation, among others, to aid the company’s revenue.
L&T Tech, in its analyst presentation released on the bourses, said it aims to reach a revenue run rate of $1 billion (about Rs 7,306.75 crore) by the second-third quarter of FY23, implying a 4% CAGR); and a run rate of $1.5 billion (Rs 10,960 crore) in FY25 (implying a 19.5% CAGR) with 18% EBIT.
The company estimates the ER&D spend to increase to $1.7-$1.9 trillion (Rs 124.25-138.86 lakh crore) in 2023 compared with $1.3 trillion (Rs 95 lakh crore) in 2020.
L&T Tech has also identified six strategic investment areas — EACV (electric autonomous and connected vehicle), medtech, 5G, AI and digital products, digital manufacturing and sustainability.
Shares of the company gained as much as 9.65% to a record high Rs 4,350 apiece around 12:30 p.m. on Friday. The relative strength index on the stock was above 70, indicating it may be ‘overbought’. It’s trading at 50 times its estimated earnings per share for the coming year.
Eleven analysts have a ‘buy’ rating, and seven each suggest a ‘hold’ and a ‘sell’, according to Bloomberg data.
Here’s what brokerages have said after L&T Technology’s analyst meet...
Company confident of delivering 15-17% revenue growth in FY22, driven by broad-based demand, deal intake, new log additions and robust deal pipeline.
Looking to build scale in new technology areas.
Company looks poised for growth acceleration.
The six strategic growth areas are likely to provide significant growth opportunities in the medium term.
Rising share in digital engineering, productivity improvement, cost optimisation and rupee depreciation likely to provide support for EBIT margin expansion.
Wage hikes, rise in attrition are the major near-term margin headwinds.
Company well-positioned to take advantage of the anticipated V-shaped recovery in the engineering, research and development industry due to deep domain capabilities and balanced portfolio across five verticals.
Kotak Institutional Equities
Maintains ‘add’ with a target price of Rs 4,250, implied upside of 5.02%.
Revenue aspiration seems achievable as the company’s core competencies and fast-growing spending pool hold it in good stead.
Company well positioned to benefit from spending rebound in global ER&D after growth deceleration in calendar year 2020.
Strong ER&D spending, sofwarisation, higher leverage of technologies like cloud, data, artificial intelligence, internet of things, 5G, 3D printing, simulations and sustainability initiatives to aid company's revenue ambitions.
Maintains ‘buy’ with a target price of Rs 4,530, implied upside of 12%.
Company’s upbeat FY25 aspiration led by strong demand outlook.
Expects the company to deliver strong revenue growth over the coming years; retains as top pick in the mid-cap IT services space.
Acceleration of digitisation, higher outsourcing are key growth levers.
Significant scope for an increased in outsourcing as the outsourced ER&D penetration in most verticals of the company remained in low-to-mid teens.
Company well placed to capture the overall demand momentum due to its multi-vertical presence.
L&T Technology’s FY25 guidance is indicative of the confidence of management in both demand outlook and ability to garner market share across verticals.