Update on the Indian Equity Market:
On Wednesday, NIFTY closed at 14,618 (+0.8%). Top gainers in NIFTY50 were Sun Pharma (+5.9%), UPL (+4.8%), and IndusInd Bank (+2.5%). The top losers were Adani Ports (-3.6%), Bajaj FInance (-1.8%), and SBI Life (-1.3%). The top sectoral gainers were PHARMA (+4.1%), BANK (+1.6%), and PVT BANK (+1.5%) and the only sectoral loser was REALTY (-1.0%).
Excerpts of an interview with Mr Amit Chadha, MD & CEO, L&T Technology (LTTS) with CNBC -TV18 dated 4th May 2021
- US & Europe back on track in terms of decision making cycles and budgets.
- They have been a little worried about the near-term execution challenges in India. Taking that into account and assuming that things will come back sometime in May, they have guided 13-15 percent growth in revenue in FY22. However, they aspire to do more.
- The company will be able to maintain an EBIT margin of 17 percent. They are back at 16.6 percent EBIT in 4QFY21. As they move forward, the entire focus will be to ensure they continue to grow profitably.
- No projects have been cancelled due to the 2nd wave of COVID.
- There is still some headroom to achieve 80% utilization levels.
- Attrition at 12 percent is the lowest in the industry. But Mr Chadha is expecting attrition to pick up in 1QFY22 due to seasonality.
- The company will be hiring 1,200 freshers in FY22 and has given increments to junior and mid-level employees effective April 1. However, senior employees will be given wage hikes from July 1.
- Commercial aerospace segment is still weak and will take time to recover. Growth trajectory of transportation is robust; plant engineering grew 10% QoQ.
- They have been picky on the hi-tech deals given their focus on margin.
Asset Multiplier comments:
- As businesses increasingly move their operations to the cloud, the demand for enabling software and services will continue to increase.
- The ongoing pandemic has pushed many enterprises to implement work-from-home policies for the first time, and this has created a demand for collaborative applications and softwares, which is likely to drive growth for software companies.
Consensus Estimate: (Source: market screener and investing.com websites)
- The closing price of LTTS was ₹ 2,569/- as of 05-May-2021. It traded at 30x/ 26x the consensus earnings estimate of ₹ 85.5/ 99.9 for FY22E/23E respectively.
- The consensus price target is ₹ 2,486/- which trades at 25x the earnings estimate for FY23E of ₹ 99.9/-
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”