L&T Infotech Rating: buy: Growth momentum is likely to be sustained

Firm key beneficiary of tech upcycle; on track to create great shareholder value; Buy retained with TP of `7,505

Female Engineer Controller Observes Working of the System. In the Background People Working and Monitors Show Various Information.

L&T Infotech (LTI) hosted Analyst Day 2021. Highlights: i) LTI noted that acceleration in digital adoption and secular demand has led to The Great Restructuring, new spend areas such as ESG & Cloud and The Great Resignation; ii) It is building next-gen capabilities & partnerships with key partners; iii) Focussing on ESG road map 2030.

Mgmt highlighted that demand trend continues to be robust and best-ever seen by the company. LTI is one of the key beneficiaries of the tech upcycle with its domain-level expertise and strong partnerships with hyperscalers. We reiterate the company would post top-quartile revenue growth, which reaffirms our conviction. Maintain ‘Buy’ with a TP of Rs 7,505 (40x Q4FY23E).

Key takeaways

Six reasons that make LTI confident of emerging stronger are: Secular Demand, Investing in capabilities, Best Talent, Robust Sales & Marketing blueprint for continued growth, an enviable team and high-quality operational resilience. LTI is building a world-class ecosystem as it got upgraded to top-tier partnerships with 80% of strategic partners, and on-boarding 9,000 start-ups on NILE platform.

Mgmt highlighted the firm is well-prepared to win the war on talent through expanded ecosystem, next-gen talent platform and globalisation. LTI’s Sales CHIP strategy’s focus is on consolidating (and growing) existing areas of strength (C), Harvesting existing high-growth engines (H), Incubating new growth engines such as renewables (I) and Strategic programmes (P). LTI is committed to sustainable development through ESG road map 2030.

Outlook: Momentum to sustain –Management highlighted that acceleration in digital adoption precipitated by the pandemic has permanently reshaped the arc of enterprise evolution. LTI is committed to seizing this opportunity and is confident of comfortably crossing the revenue milestone of $2 bn in FY22.

LTI is focussed on spending in newer areas like ESG, Cybersecurity, Digital, Data and Cloud. And we believe it’s on track to create immense shareholder value over the next 15 years. The stock is trading at 31.8x FY23E. We maintain ‘Buy’.

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