Despite a revenue miss in the first quarter, L&T Technology Services’ (LTTS) shares increased by 3% in Wednesday’s trading on ambitious FY24 expectations. The revenue miss for the first quarter was caused by a double-digit decline in the telecom and high-tech verticals. It will be difficult for LTTS to meet its FY24 guidance, according to analysts, and the stock’s risk-reward ratio is negative given its high valuations.
The stock’s target price has dropped from Rs 3,000 to Rs 2,980 at Nomura India. The stock was up 3.09 percent on Wednesday and trading at Rs 4,189 on the NSE. Nomura’s estimate indicates a possible downside of 28% at this pricing.
According to Phillip Capital, the FY24 organic CC growth estimate of 10%-plus looks difficult, and the FY24 margin objective of 17% also appears aggressive given wage increases due in the September quarter and the limited levers at hand.
“Overall, soft start in Q1 will likely be compensated through quick ramp ups of deals already announced, a higher ask rate leaves no room for any disappointment. At 33 times FY24 PE, valuations remain expensive,” Phillip Capital said. This brokerage has a target of Rs 3,500 on the stock.
LTTS said that numerous deals are in advanced stages of close due to the timely execution of six deals won in Q1 (one for $D50 million and five for $10 million or more apiece). SWC is confident in being able to meet its growth projection thanks to a robust pipeline and its H2 seasonality. Nomura isn’t persuaded. We notice that the required rate to accomplish the yearly increase is 4% QoQ growth in the following three quarters, which is a challenging task, it stated.
With the exception of transportation, Antique Stock Broking reported that LTTS’ Q1 performance was modest due to delays in decision-making.
