L&T Infotech: Maintain ‘buy’ with target price of Rs 4,197

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December 15, 2020 5:20 AM

The company has decided to create a cloud sales unit and three independent business units for each of the three hyper-scalers — AWS, Azure and GCP (Google cloud platform).

HRRL is a joint venture between Hindustan Petroleum Corporation (HPCL) and the government of Rajasthan with an equity participation of 74% and 26% respectively.HRRL is a joint venture between Hindustan Petroleum Corporation (HPCL) and the government of Rajasthan with an equity participation of 74% and 26% respectively.

We attended L&T Infotech’s (LTI’s) analyst meet on Monday and the key takeaway was the management reiterating confidence in demand acceleration and margin sustenance. The company expects significant opportunity in cloud and has created independent business units for the three large hyper-scalers. It pegs cloud alone to be a $1-billion business over the next three years from the current $180 million. The management is also targeting 14-15% net margin in the long run.

We continue to believe that LTI’s excellent sales and execution engine coupled with financial discipline render it the best long-term story. We maintain our view of LTI creating shareholder value similar to TCS over the next 15 years. Maintain ‘buy’ with target price of Rs 4,197. Management highlighted that cloud is the most promising opportunity in the post-Covid world and it could be potentially a $1-billion business over the next three years.

The company has decided to create a cloud sales unit and three independent business units for each of the three hyper-scalers — AWS, Azure and GCP (Google cloud platform). The management also intends to target beyond Global 2000 enterprises to offer its cloud solutions. We believe the above strategy is right in the light of the radical change in the technology world and will enable LTI post high growth over the next few years.

The management highlighted LTI’s focus on big bets of future in four key themes — enhancing customer experience; improving productivity; improving enterprise resilience; and speed & time to market. The management plans to invest strongly in its GRIT alliance with top clients to draw a holistic landscape of client requirement and offer optimum solutions towards creating new business models through extensive use of technology and platform.

LTI continues to aggressively focus on large deals, relationships and alliances with third-party advisors to spur growth.

LTI’s analyst meet clearly reaffirmed our Tech upcycled or Techolution thesis that we have been propagating since May, led by higher and faster adoption of cloud and digital. The CEO highlighted that higher and faster technology adoption was more structural than temporary and there was genuine higher adoption of technology.

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