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L&T Technology Services Ltd. reported broadly inline financial performance for the quarter. Both, the sequential revenue growth and Ebit margin were as per expectation.
It reported revenue growth of 0.9% QoQ in USD terms. The constant currency revenue growth was 0.9% QoQ in cc terms. There was sequential increase in Ebit margin (up 11 basis points QoQ) to 17.2% led by positive operating efficiency.
Employee attrition continues to decline as last twelve months attrition decreased by 90 bps QoQ to 15.8%.
The near term demand environment remains challenging as the clients across sectors remain cautious regarding the evolving macroeconomic situation leading to slow decision making and thus impacting near term revenue performance.
Improving employee pyramid and falling employee attrition will support operating margin going ahead. We estimate revenue compound annual growth rate of 17.1% (including impact of SWC acquisition) over FY23‐26E with average Ebit margin of 18.6%.
We maintain our ‘Neutral’ rating on the stock with revised target price of Rs 5,447/share at 31 times on FY26E earnings per share.
The stock trades at price-to-earnings ratio of 34.4 times/30.5 times on FY25E/FY26E EPS.
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