Sharekhan has listed the stock of L&T Technology Services as a "buy" from the current levels for decent profits. The firm has a set a price target of Rs 4,650 on the stock.
6- Dimensional Growth Path
According to Sharekhan, on its annual investor and analyst day 2021, L&T Technology Services highlighted on its business strategy, both near-term and long-term outlook for 2025, a six-dimensional growth path, six strategic bets, customer-focused approach to achieve industry-leading growth and a sustainable operating model.
"The company wants to be among the top 5 global pure play engineering services providers of choice. We believe the company's strength around 4Es (complex engineering, digital engineering, design engineering and business engineering) and strong frameworks across segments will provide significant headroom for growth," the brokerage has said.
According to Sharekhan, the management aims to achieve $1 billion annual revenue run rate by Q2-Q3 of FY2023, which translates 3.3%-4% CQGR. On long term, it aspires to achieve $1.5 billion in revenue in FY2025, which implies a 19.5% CAGR over FY2021- FY2025.
Valuations and reasons to buy the stock of L&T Technology Services
"We expect USD revenue/EPS to clock a CAGR of 19%/ 28%, respectively, over FY2021- 24E. Management aims to achieve 18% EBIT margin by FY2025, aided by higher revenue growth, improving margins in the hi-tech vertical and change in revenue mix," the brokerage has said.
"At the current market price, the stock trades at 36x/31x its FY2023E/FY2024E earnings estimates, which justifies premium valuations, given anticipated large deal wins in the coming quarters, presence in the fast-growing ERD segment, and consistent payouts. On account of improving return ratios and free cash flow (FCF) generation, we retain a Buy on L&T Technology Services with a revised price target of Rs. 4,650.. ," Sharekhan has said in its report.
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