Buy This Multibagger Large Cap L&T Group Stock, Shares Can Surge Up To 10%, Says HDFC Securities

HDFC Securities has given a BUY rating on the stock of Larsen & Toubro Infotech Limited (LTI) with a near-term Target Price of Rs 5,215 per share. According to the given target price, the stock is likely to surge 10% from its current level. LTI is Larsen & Toubro Group's large-cap IT sector company having a market cap of Rs 82,879.59 crore.

Stock Outlook & Returns

At the time of writing the share price of the LTI is Rs 4,715.95 per share, up 1.60% from its previous close on NSE.

The stock in the past 1 week surged by 2.52% and in the past 1 month by 7.8%, respectively. In the past 3 months, it has given 11.98% positive return and in the past 6 months 19.51% negative return. Over the past 1 year, it has given 20.06% negative return. It has given multibagger returns of 193.11% in 3 years and 484.74% in the past 5 years, respectively.

On NSE, the stock's 52-week low is Rs 3,733.30, which was recorded on 26 May 2022, and the 52 week high is Rs 7,588.80, recorded on 04 January 2022, respectively.

Q2FY23 highlights

(1) LTI's revenue came in line with our estimate of USD 601mn, +3.6/+18.1% QoQ/YoY (+4.6/+21.6% QoQ/YoY CC terms), led by growth in offshore/onsite volume of +5.2% QoQ each. (2) Among the verticals, growth was led by energy & utilities (+14% QoQ CC), BFS (+5% QoQ) and insurance (+4.5% QoQ) while hi-tech declined by -4.7% QoQ CC, impacted by large project transitioning from onsite to offshore. (3) EBITM increased by 13bps QoQ to 16.1% (marginally lower than our estimate of 16.3%), impacted by increase in employee cost (senior-level wage increase) & lower utilisation, which was offset by FX tailwind. (4) Top-5 accounts improved +5% QoQ and the top-10 accounts grew by +4.1% QoQ in USD terms. (5) LTI added 2,215 employees in Q2FY23 (1,600 freshers) and it remains on track to add 6,500+ freshers in FY23. (6) LTI expects the PATM to continue in the range of 14-15% for FY23E.

Outlook

The brokerage said, "We have factored in USD revenue growth of +17.4/13.7/13.9% and EBITM of 16.1/16.5/16.6% for FY23/24/25E. APATM is estimated at 13.5% for FY23/24/25E. At the CMP, LTI is trading at 26.7x FY24E, with an FY22-25E EPS CAGR of 15%."

HDFC Securities maintain BUY with a Target Price of INR 5,215

According to the brokerage, L&T Infotech's (LTI) revenue and margin came in line in Q2FY23. Revenue growth of 4.6% QoQ and 21.6% YoY CC and flat margin sequentially supported the 23% YoY growth in profit. Key growth drivers include (1) continuity in net new large deal TCV at USD 80mn (similar to 4QFY22/1QFY23 rate), including a new logo F500 win (Hi-Tech vertical); (2) strong H2 seasonality of LTI ahead; (3) 4.5% QoQ increase in headcount (crossing 50k); and (4) steady large deal pipeline with higher deal tenure and strong outlook of core vertical BFSI (no exposure to mortgage segment). Integration with Mindtree will create service line and vertical revenue synergies and we believe that the foundation for growth leadership in ‘tier-1' IT has been set. Maintain BUY on LTI with a Target Price of INR 5,215, based on 29x Jun-24E EPS.

Disclaimer

The stock has been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.