larsen & toubro infotech04may19 - moneycontrol.com · 2019. 5. 6. · larsen & toubro...
Post on 16-Aug-2021
6 Views
Preview:
TRANSCRIPT
May 5, 2019 1
Rating: BUY | CMP: Rs1,678 | TP: Rs1,981
Top client headwind to persist
LTI disappointed with soft organic growth of 0.8% CC with sharp decline in
margins also. LTI reported CC revenue growth of 1.9% QoQ of which 1.1%
was contributed by Nielsen+Partner and Ruletronics acquisitions. Weak
growth was on account of sharp revenue decline from the top client, which
belongs to the BFS vertical. EBIT margin declined by 140 bps QoQ to 17.7%
and was impacted by three factors i) 200 bps decline in utilization rate
impacting margin by 60 bps, ii) 60 bps impact due to investments in sales &
digital & (iii) 40 bps impact from appreciation of INR against USD. Revenues
from top five clients declined by 4.8% QoQ. LTI has announced 2 large new
deals with net TCV in excess of US$100mn. We believe weakness of top client
will weigh on the growth of FY20E. We cut our revenue estimates by ~2% in
FY20E & ~1% in FY21E. We cut our margins by 80bps & 30bps for FY20E &
FY21E to factor higher S&M spends & spike in attrition (+100bps QoQ to
17.5%) may lead to salary hike. Despite headwinds ahead in top client &
margins, we expect LTI to deliver revenue growth of 14% & 15% in FY20E &
FY21E respectively. We value LTI at 18X FY21E multiple at an EPS of Rs.93 &
Rs. 110 to arrive at a changed target price of Rs. 1981(earlier: Rs.2032).
Top account de-growth disappoints: LTI reported CC revenue growth of
1.9% QoQ of which 1.1% was contributed by Nielsen+Partner and Ruletronics
acquisitions. Weak growth was on account of sharp revenue decline from the
top client, which belongs to the BFS vertical. LTI reported 2% QoQ dollar
revenue growth at US$ 354mn (Ple: US$356mn). Revenues from top five
clients declined by 4.8% QoQ. Management mentioned the decline is mainly
due to its top client based in US geography
Higher utilization led to drop in margins: EBIT margin declined by 140 bps
QoQ to 17.7% and was impacted by three factors i) 200 bps decline in
utilization rate impacting margin by 60 bps, ii) 60 bps impact due to investments
in sales & digital & (iii) 40 bps impact from appreciation of INR against USD.
Rise in attrition by 100bps QoQ to 17.5% may lead to elevated salary hike in
coming quarters. Management have already highlighted in past at utilization is
not at sustainable range (~81%) may further come down. We cut our margins
by 80bps & 30bps for FY20E & FY21E to factor higher S&M spends & spike in
attrition may lead to salary hike.
Weak growth in BFS: Revenue decline from the top client showed in revenue
decline in the BFS vertical (-3% QoQ CC) and Analytics, AI & Cognitive offering
(-4.2% QoQ CC). Insurance showed a soft growth of 1.6% QoQ CC &
manufacturing & Hi Tech, Media & Entertainment showed a strong growth of
8% QoQ CC & 11.35 QoQ CC respectively.
Soft cash generation: OCF was at 81% of the net profit & was mainly
impacted by higher unbilled revenues. Receivables at 98 days was higher than
peers. We believe market share gains over the past years has led to CFO-PAT
ratio to be lower as compared to its peers.
Larsen & Toubro Infotech (LTI IN)
May 5, 2019
Q4FY19 Result Update
☑ Change in Estimates | ☑ Target | Reco
Change in Estimates
Current Previous
FY20E FY21E FY20E FY21E
Rating BUY BUY
Target Price 1,981 2,032
Sales (Rs. m) 108,295 125,041 110,426 126,643
% Chng. (1.9) (1.3)
EBITDA (Rs. m) 20,598 24,400 21,824 24,365
% Chng. (5.6) 0.1
EPS (Rs.) 94.1 112.1 98.7 111.8
% Chng. (4.7) 0.2
Key Financials
FY18 FY19 FY20E FY21E
Sales (Rs. bn) 73 94 108 125
EBITDA (Rs. bn) 13 19 21 24
Margin (%) 17.3 19.9 19.0 19.5
PAT (Rs. bn) 12 15 16 19
EPS (Rs.) 68.4 87.8 94.1 112.1
Gr. (%) 20.4 28.4 7.1 19.1
DPS (Rs.) 21.9 28.1 30.1 35.9
Yield (%) 1.3 1.7 1.8 2.1
RoE (%) 33.6 34.9 30.6 30.2
RoCE (%) 31.7 40.0 35.9 35.3
EV/Sales (x) 3.7 2.8 2.4 2.0
EV/EBITDA (x) 21.5 14.3 12.8 10.5
PE (x) 24.5 19.1 17.8 15.0
P/BV (x) 7.5 6.0 5.0 4.1
Key Data LRTI.BO | LTI IN
52-W High / Low Rs.1,990 / Rs.1,437
Sensex / Nifty 38,963 / 11,712
Market Cap Rs.291bn/ $ 4,201m
Shares Outstanding 174m
3M Avg. Daily Value Rs.568.56m
Shareholding Pattern (%)
Promoter’s 74.84
Foreign 7.84
Domestic Institution 7.38
Public & Others 9.94
Promoter Pledge (Rs bn) -
Stock Performance (%)
1M 6M 12M
Absolute (1.5) (1.5) 12.5
Relative (1.7) (11.5) 1.4
Aniket Pande
aniketpande@plindia.com | 91-22-66322300
Rajat Gandhi
rajatgandhi@plindia.com | 91-22-66322246
Larsen & Toubro Infotech
May 5, 2019 2
Q4FY19: Quick view on results
Y/e March (Rs mn) 4QFY19 3QFY19 QoQ gr. 4QFY18 YoY gr. Ple Variance
(Actual vs Ple)
Revenues (USD mn) 354 347 2.0% 309 14.5% 356 -0.5%
Revenues (INR mn) 24,860 24,729 0.5% 20,012 24.2% 24,890 -0.1%
EBITDA (INR mn) 4,765 5,090 -6.4% 3,536 34.8% 4,829 -1.3%
EBITDA Margins (%) 19.2 20.6 -142bp 17.7 150bp 19.4 -23bp
EBIT (INR mn) 4,394 4,735 -7.2% 3,176 38.4% 4,455 -1.4%
EBIT Margins (%) 17.7 19.1 -147bp 15.9 180bp 17.9 -23bp
PAT (INR mn) 3,787 3,755 0.9% 2,893 30.9% 3,643 4.0%
EPS 22 22 0.9% 17 31.5% 21 4.0%
Source: Company, PL
Top client led to revenue drag
232 240 245 254 259 271294
309 320 329347 354
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
0
50
100
150
200
250
300
350
400
Q1F
Y17
Q2F
Y17
Q3F
Y17
Q4F
Y17
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
USD Revenue Growth (Mn) Growth QoQ (%)
Source: Company, PL
Pressure on EBITDA margins due to drop in utilizations
19.6%19.0%
18.1%
19.0%
16.8% 16.8%17.1%
17.7%
19.4%
20.5% 20.6%
19.2%
15.0%
16.0%
17.0%
18.0%
19.0%
20.0%
21.0%
Q1F
Y17
Q2F
Y17
Q3F
Y17
Q4F
Y17
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
EBITDA Margin %
Source: Company, PL
Revenue decline from the top client
showed in revenue decline in the BFS
vertical (-3% QoQ CC) and Analytics,
AI & Cognitive offering (-4.2% QoQ
CC).
We cut our margins by 80bps &
30bps for FY20E & FY21E to factor
higher S&M spends & spike in
attrition (+100bps QoQ to 17.5%)
may lead to salary hike.
Larsen & Toubro Infotech
May 5, 2019 3
Key Highlights of Conference Call:
Growth was tepid during the quarter because of tightness in spending of budget
in top clients led by change in leadership & restructuring which will continue in
Q1FY20 as well.
Management cited that they are having strong relationship with client and this
is temporary challenge and remain confident of recovering from Q2FY20.
Margin was lower during the quarter with headwind from lower utilization,
continuous investments and rupee appreciation.
Two large deals won in Q4 with cumulative net-new TCV in excess of US$100
million in Insurance and manufacturing vertical. Ramp up of this deals will start
in Q2FY20 with full pickup in Q3 & Q4FY20.
Utilization was lower during the quarter and management cited it is comfortable
at this level. Attrition was higher during the quarter and management guided to
reduce it with increase in employee engagement by creating upskilling
environment apart from wage hike.
Digital (38% of revenues) continues to remains the key growth driver and
company will focus on strengthening in digital and mining top clients for growth.
Investments in platforms that service as building block for clients in consisting
delivering performance and client centricity is appreciated by the clients.
Management remain confident on growth outlook with strong demand
environment.
Strategy is to focus on capability driven acquisitions.
Apart from client specific issue in BFS vertical management remain confident
on growth outlook in this vertical with steady demand environment.
Due to change in Ind AS policy, treatment of lease expenses will be under
depreciation & finance charges, will help in improvement of EBITDA margins
upto 40bps however will impact on PAT margin with a dip of upto 30bps.
India business and ROW contributed
52% to the current quarter’s
incremental revenues. March is a
seasonally strong quarter for India
business.
Two large deals won in Q4 with
cumulative net-new TCV in excess of
US$100 million in Insurance and
manufacturing vertical. Ramp up of
this deals will start in Q2FY20 with full
pickup in Q3 & Q4FY20.
Larsen & Toubro Infotech
May 5, 2019 4
Investments in digital making SG&A expenses go higher
15%16% 16%
17% 17% 17%16% 16% 16%
15% 14%15%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
8%
10%
12%
14%
16%
18%
Q1F
Y17
Q2F
Y17
Q3F
Y17
Q4F
Y17
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
SG&A Exp EBITDA Margin %
Source: Company, PL
Utilizations came at sustainable level
77.4%
78.7%78.1% 78.3%
77.7%
79.6%80.3%
79.9% 79.7%80.4%
82.1%
80.1%78.0%
80.6% 80.5%
79.3%
78.2%
80.7%81.5%
81.1% 81.2%
82.3%83.0%
81.1%
74.0%
76.0%
78.0%
80.0%
82.0%
84.0%
Q1F
Y17
Q2F
Y17
Q3F
Y17
Q4F
Y17
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
Utilization Including Trainess Utilization excluding Trainess
Source: Company, PL
Rising Attrition causing concern
19.5%
18.5%18.1%
16.9%
14.7% 15.0%14.6% 14.8% 15.1% 15.3%
16.5%
17.5%
12.0%
14.0%
16.0%
18.0%
20.0%
Q1F
Y17
Q2F
Y17
Q3F
Y17
Q4F
Y17
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
Attrition % (LTM)
Source: Company, PL
Management have already
highlighted in past at utilization is not
at sustainable range (~81%) may
further come down.
Rise in attrition by 100bps QoQ to
17.5% may lead to elevated salary
hike in coming quarters
Larsen & Toubro Infotech
May 5, 2019 5
BFSI vertical drags the growth in the quarter
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Q1F
Y17
Q2F
Y17
Q3F
Y17
Q4F
Y17
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
USD Revenue Growth QoQ (%) BFSI Revenues Growth QoQ (%)
Source: Company, PL
Geography-wise revenues
Geography Revenues (USD mn) 4QFY19 3QFY19 QoQ gr. 4QFY18 YoY gr.
North America 235 232 1.4% 204 15.2%
Europe 58 58 0.2% 57 1.0%
RoW 32 31 5.5% 23 40.8%
India 29 27 7.2% 25 17.4%
Total 354 347 2.0% 309 14.6%
-as a % of totsl sales
North America 66.4% 66.8% -40bp 66.0% 40bp
Europe 16.4% 16.7% -30bp 18.6% -220bp
RoW 9.1% 8.8% 30bp 7.4% 170bp
India 8.2% 7.8% 40bp 8.0% 20bp
Source: Company, PL
Revenue by Service offerings
Service Revenues (USD mn) 4QFY19 3QFY19 QoQ gr. 4QFY18 YoY gr.
Application Development Maintenance 105 107 -2% 101 4%
Enterprise Solutions 103 96 7% 83 24%
Infrastructure Management Services 39 40 -2% 36 8%
Testing 29 27 9% 26 13%
Analytics, AI & Cognitive 38 39 -3% 33 14%
Enterprise Integration & Mobility 28 26 7% 20 41%
Platform Based Solutions 11 11 -4% 9 22%
Total 354 347 2% 309 14%
-as a % of totsl sales
Application Development Maintenance 29.7% 30.8% -110bp 32.8% -310bp
Enterprise Solutions 29.2% 27.8% 140bp 27.0% 220bp
Infrastructure Management Services 11.0% 11.4% -40bp 11.7% -70bp
Testing 8.3% 7.8% 50bp 8.4% -10bp
Analytics, AI & Cognitive 10.7% 11.3% -60bp 10.7% 0bp
Enterprise Integration & Mobility 8.0% 7.6% 40bp 6.5% 150bp
Platform Based Solutions 3.1% 3.3% -20bp 2.9% 20bp
Source: Company, PL
Larsen & Toubro Infotech
May 5, 2019 6
Vertical- wise revenues
Vertical revenues (USD mn) 4QFY19 3QFY19 QoQ gr. 4QFY18 YoY gr.
BFS 98 101 -3% 89 11%
Insurance 63 62 2% 57 11%
Manufacturing 59 54 9% 53 10%
Energy & Utilities 39 37 4% 36 10%
CPG, Retail 38 37 2% 28 35%
Hi-tech & Media 44 39 12% 33 34%
Others 14 17 -17% 14 -3%
Total 354 347 2% 309 14%
-as a % of total sales
BFS 27.7% 29.1% -140bp 28.7% -100bp
Insurance 17.8% 17.8% 0bp 18.3% -50bp
Manufacturing 16.6% 15.6% 100bp 17.3% -70bp
Energy & Utilities 11.0% 10.8% 20bp 11.5% -50bp
CPG, Retail 10.6% 10.6% 0bp 9.0% 160bp
Hi-tech & Media 12.4% 11.3% 110bp 10.6% 180bp
Others 3.9% 4.8% -90bp 4.6% -70bp
Source: Company, PL
Client Concentration (%)
Client Details 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19
Top 5 clients 36.7% 37.1% 38.3% 38.5% 38.1% 38.0% 36.4% 35.2% 36.6% 36.2% 34.5% 32.2%
Top 10 clients 51.3% 51.8% 52.1% 53.1% 50.9% 50.9% 50.8% 49.6% 50.3% 49.9% 48.4% 47.0%
Top 20 clients 67.7% 67.6% 68.3% 68.0% 66.3% 66.0% 66.1% 65.1% 66.0% 65.5% 64.3% 63.4%
Source: Company, PL
Client Metrics
Client details 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19
Number of Active Clients 259 259 264 261 256 256 289 300 301 312 314 343
New Clients Added 12 16 14 15 12 13 17 15 19 22 17 14
100 Million dollar + 1 1 1 1 1 1 1 1 1 114 121 123
50 Million dollar + 3 4 4 4 4 4 4 4 4 44 47 49
20 Million dollar + 10 10 10 11 12 12 13 13 13 25 25 26
10 Million dollar + 19 20 22 23 24 23 22 23 25 14 15 17
5 Million dollar + 35 34 35 35 35 39 43 44 42 4 5 5
1 Million dollar + 89 91 95 96 97 99 102 109 114 1 1 1
Source: Company, PL
Headcount Metrics
1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19
Total Headcount 19,292 19,751 20,605 21203 22,321 22,554 23,394 24,139 25,150 26,414 27,513 28,169
Development 17,959 18,428 19,234 19627 20,899 21,147 21,979 22,655 23,656 24,923 25,985 26,572
Sales & Support 1,333 1,323 1,371 1396 1,422 1,407 1,415 1,484 1,494 1,491 1,528 1,597
Attrition % (LTM) 19.50% 18.50% 18.10% 16.90% 14.70% 15.0% 14.6% 14.8% 15.1% 15.3% 16.5% 17.5%
Net addition (780) 459 854 598 1,118 233 840 745 1,011 1,264 1,099 656
Source: Company, PL
Larsen & Toubro Infotech
May 5, 2019 7
Effort Mix & Revenue Mix (%)
Effort Mix 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19
Onsite 24.7% 24.2% 24.3% 24.0% 23.8% 23.3% 23.5% 23.1% 23.0% 22.6% 22.0% 21.9%
Offshore 75.3% 75.8% 75.7% 76.0% 76.2% 76.7% 76.5% 76.9% 77.0% 77.4% 78.0% 78.1%
Revenue Mix
Onsite 48.1% 48.8% 47.7% 48.7% 46.8% 46.6% 46.2% 45.7% 46.8% 47.6% 47.8% 47.8%
Offshore 51.9% 51.2% 52.3% 51.3% 53.2% 53.4% 53.8% 54.3% 53.2% 52.4% 52.2% 52.2%
Source: Company, PL
Larsen & Toubro Infotech
May 5, 2019 8
Financials
Income Statement (Rs m)
Y/e Mar FY18 FY19 FY20E FY21E
Net Revenues 73,221 94,404 108,295 125,041
YoY gr. (%) 12.6 28.9 14.7 15.5
Employee Cost 48,507 61,643 70,913 81,277
Gross Profit 24,714 32,761 37,382 43,764
Margin (%) 33.8 34.7 34.5 35.0
SG&A Expenses - - - -
Other Expenses - - - -
EBITDA 12,649 18,781 20,598 24,400
YoY gr. (%) 2.8 48.5 9.7 18.5
Margin (%) 17.3 19.9 19.0 19.5
Depreciation and Amortization 1,563 1,471 1,624 1,876
EBIT 11,086 17,310 18,973 22,524
Margin (%) 15.1 18.3 17.5 18.0
Net Interest - - - -
Other Income 4,102 2,915 2,150 3,000
Profit Before Tax 15,188 20,225 21,123 25,524
Margin (%) 20.7 21.4 19.5 20.4
Total Tax 3,421 5,122 4,943 6,248
Effective tax rate (%) 22.5 25.3 23.4 24.5
Profit after tax 11,767 15,103 16,180 19,277
Minority interest - - - -
Share Profit from Associate - - - -
Adjusted PAT 11,767 15,103 16,180 19,277
YoY gr. (%) 21.1 28.4 7.1 19.1
Margin (%) 16.1 16.0 14.9 15.4
Extra Ord. Income / (Exp) - - - -
Reported PAT 11,767 15,103 16,180 19,277
YoY gr. (%) 21.1 28.4 7.1 19.1
Margin (%) 16.1 16.0 14.9 15.4
Other Comprehensive Income - - - -
Total Comprehensive Income 11,767 15,103 16,180 19,277
Equity Shares O/s (m) 172 172 172 172
EPS (Rs) 68.4 87.8 94.1 112.1
Source: Company Data, PL Research
Balance Sheet Abstract (Rs m)
Y/e Mar FY18 FY19 FY20E FY21E
Non-Current Assets
Gross Block 11,599 13,599 15,599 17,599
Tangibles 4,483 5,883 7,283 8,683
Intangibles 7,116 7,716 8,316 8,916
Acc: Dep / Amortization 7,555 9,026 10,650 12,526
Tangibles 1,975 2,639 3,372 4,219
Intangibles 5,580 6,387 7,278 8,307
Net fixed assets 4,044 4,573 4,949 5,073
Tangibles 2,508 3,244 3,911 4,464
Intangibles 1,536 1,329 1,038 609
Capital Work In Progress 68 68 68 68
Goodwill 2,763 2,763 2,763 2,763
Non-Current Investments 1,109 1,159 1,209 1,259
Net Deferred tax assets 1,789 1,789 1,789 1,789
Other Non-Current Assets 1,980 1,980 1,980 1,980
Current Assets
Investments 12,643 13,643 14,643 15,643
Inventories - - - -
Trade receivables 13,962 18,001 20,650 23,843
Cash & Bank Balance 3,633 5,953 10,926 17,334
Other Current Assets 1,125 1,125 1,125 1,125
Total Assets 53,827 64,235 74,919 87,658
Equity
Equity Share Capital 172 172 172 172
Other Equity 38,426 47,710 57,657 69,506
Total Networth 38,598 47,882 57,829 69,678
Non-Current Liabilities
Long Term borrowings - - - -
Provisions 279 279 279 279
Other non current liabilities - - - -
Current Liabilities
ST Debt / Current of LT Debt - - - -
Trade payables 3,888 5,013 5,750 6,640
Other current liabilities 9,874 9,874 9,874 9,874
Total Equity & Liabilities 53,826 64,235 74,919 87,658
Source: Company Data, PL Research
Larsen & Toubro Infotech
May 5, 2019 9
Cash Flow (Rs m)
Y/e Mar FY18 FY19 FY20E FY21E Year
PBT 14,415 20,225 21,123 25,524
Add. Depreciation 1,563 1,471 1,624 1,876
Add. Interest 157 - - -
Less Financial Other Income 4,102 2,915 2,150 3,000
Add. Other (356) (2,915) (2,150) (3,000)
Op. profit before WC changes 15,779 18,781 20,598 24,400
Net Changes-WC (3,760) (5,384) (3,548) (4,267)
Direct tax (3,581) (5,122) (4,943) (6,248)
Net cash from Op. activities 8,438 8,275 12,107 13,885
Capital expenditures (2,128) (2,000) (2,000) (2,000)
Interest / Dividend Income 539 2,915 2,150 3,000
Others (3,017) (1,050) (1,050) (1,050)
Net Cash from Invt. activities (4,606) (135) (900) (50)
Issue of share cap. / premium 3 - - -
Debt changes - - - -
Dividend paid (3,534) (5,819) (6,234) (7,427)
Interest paid (138) - - -
Others (407) - - -
Net cash from Fin. activities (4,076) (5,819) (6,234) (7,427)
Net change in cash (244) 2,321 4,973 6,408
Free Cash Flow 7,419 6,275 10,107 11,885
Source: Company Data, PL Research
Quarterly Financials (Rs m)
Y/e Mar Q1FY19 Q2FY19 Q3FY19 Q4FY19
Net Revenue 21,557 23,312 24,729 24,860
YoY gr. (%) 29.0 33.2 31.3 24.2
Raw Material Expenses 13,977 15,124 16,125 16,417
Gross Profit 7,580 8,188 8,604 8,443
Margin (%) 35.2 35.1 34.8 34.0
EBITDA 4,190 4,790 5,090 4,765
YoY gr. (%) 18.5 14.3 6.3 (6.4)
Margin (%) 19.4 20.5 20.6 19.2
Depreciation / Depletion 378 367 355 371
EBIT 3,812 4,423 4,735 4,394
Margin (%) 17.7 19.0 19.1 17.7
Net Interest - - - -
Other Income 1,036 943 288 648
Profit before Tax 4,848 5,366 5,023 5,042
Margin (%) 22.5 23.0 20.3 20.3
Total Tax 1,236 1,363 1,268 1,255
Effective tax rate (%) 25.5 25.4 25.2 24.9
Profit after Tax 3,612 4,003 3,755 3,787
Minority interest - - - -
Share Profit from Associates - - - -
Adjusted PAT 3,612 4,003 3,755 3,787
YoY gr. (%) 35.1 46.7 32.7 30.9
Margin (%) 16.8 17.2 15.2 15.2
Extra Ord. Income / (Exp) - - - -
Reported PAT 3,612 4,003 3,755 3,787
YoY gr. (%) 35.1 46.7 32.7 30.9
Margin (%) 16.8 17.2 15.2 15.2
Other Comprehensive Income - - - -
Total Comprehensive Income 3,612 4,003 3,755 3,787
Avg. Shares O/s (m) 174 174 174 174
EPS (Rs) 20.7 23.0 21.5 21.7
Source: Company Data, PL Research
Key Financial Metrics
Y/e Mar FY18 FY19 FY20E FY21E
Per Share(Rs)
EPS 68.4 87.8 94.1 112.1
CEPS 77.5 96.4 103.5 123.0
BVPS 224.4 278.4 336.2 405.1
FCF 43.1 36.5 58.8 69.1
DPS 21.9 28.1 30.1 35.9
Return Ratio(%)
RoCE 31.7 40.0 35.9 35.3
ROIC 45.8 54.7 53.3 55.3
RoE 33.6 34.9 30.6 30.2
Balance Sheet
Net Debt : Equity (x) (0.4) (0.4) (0.4) (0.5)
Debtor (Days) 70 70 70 70
Valuation(x)
PER 24.5 19.1 17.8 15.0
P/B 7.5 6.0 5.0 4.1
P/CEPS 21.7 17.4 16.2 13.6
EV/EBITDA 21.5 14.3 12.8 10.5
EV/Sales 3.7 2.8 2.4 2.0
Dividend Yield (%) 1.3 1.7 1.8 2.1
Source: Company Data, PL Research
Larsen & Toubro Infotech
May 5, 2019 10
Price Chart Recommendation History
No. Date Rating TP (Rs.) Share Price (Rs.)
1 5-Apr-19 BUY 2,032 1,652
Analyst Coverage Universe
Sr. No. CompanyName Rating TP (Rs) Share Price (Rs)
1 Cyient Accumulate 621 585
2 HCL Technologies BUY 1,186 1,093
3 Hexaware Technologies Reduce 325 333
4 Infosys Accumulate 782 748
5 L&T Technology Services Accumulate 1,807 1,609
6 Larsen & Toubro Infotech BUY 2,032 1,652
7 Mindtree Reduce 873 972
8 Mphasis Accumulate 1,090 975
9 NIIT Technologies BUY 1,539 1,348
10 Persistent Systems Hold 618 636
11 Redington (India) BUY 108 98
12 Sonata Software Accumulate 400 346
13 Tata Consultancy Services BUY 2,312 2,013
14 TeamLease Services Hold 3,203 3,031
15 Tech Mahindra BUY 886 777
16 Wipro Hold 247 281
17 Zensar Technologies Accumulate 256 231
PL’s Recommendation Nomenclature (Absolute Performance)
Buy : > 15%
Accumulate : 5% to 15%
Hold : +5% to -5%
Reduce : -5% to -15%
Sell : < -15%
Not Rated (NR) : No specific call on the stock
Under Review (UR) : Rating likely to change shortly
601
944
1288
1631
1975
Jul -
16
Jan
- 1
7
Jun
- 1
7
Dec -
17
May -
18
Nov -
18
Ap
r -
19
(Rs)
Larsen & Toubro Infotech
May 5, 2019 11
ANALYST CERTIFICATION
(Indian Clients)
We/I, Mr. Aniket Pande- MBA, Mr. Rajat Gandhi- MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
(US Clients)
The research analysts, with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and No part of his or her or their compensation was, is or will be directly related to the specific recommendation or views expressed in this research report.
DISCLAIMER
Indian Clients
Prabhudas Lilladher Pvt. Ltd, Mumbai, India (hereinafter referred to as “PL”) is engaged in the business of Stock Broking, Portfolio Manager, Depository Participant and distribution for third party financial products. PL is a subsidiary of Prabhudas Lilladher Advisory Services Pvt Ltd. which has its various subsidiaries engaged in business of commodity broking, investment banking, financial services (margin funding) and distribution of third party financial/other products, details in respect of which are available at www.plindia.com.
This document has been prepared by the Research Division of PL and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of PL. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security.
The information contained in this report has been obtained from sources that are considered to be reliable. However, PL has not independently verified the accuracy or completeness of the same. Neither PL nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein.
Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient's particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor.
Either PL or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication.
PL may from time to time solicit or perform investment banking or other services for any company mentioned in this document.
PL is in the process of applying for certificate of registration as Research Analyst under Securities and Exchange Board of India (Research Analysts) Regulations, 2014
PL submits that no material disciplinary action has been taken on us by any Regulatory Authority impacting Equity Research Analysis activities.
PL or its research analysts or its associates or his relatives do not have any financial interest in the subject company.
PL or its research analysts or its associates or his relatives do not have actual/beneficial ownership of one per cent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
PL or its research analysts or its associates or his relatives do not have any material conflict of interest at the time of publication of the research report.
PL or its associates might have received compensation from the subject company in the past twelve months.
PL or its associates might have managed or co-managed public offering of securities for the subject company in the past twelve months or mandated by the subject company for any other assignment in the past twelve months.
PL or its associates might have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
PL or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months
PL or its associates might have received any compensation or other benefits from the subject company or third party in connection with the research report.
PL encourages independence in research report preparation and strives to minimize conflict in preparation of research report. PL or its analysts did not receive any compensation or other benefits from the subject Company or third party in connection with the preparation of the research report. PL or its Research Analysts do not have any material conflict of interest at the time of publication of this report.
It is confirmed that Mr. Aniket Pande- MBA, Mr. Rajat Gandhi- MBA Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
The Research analysts for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.
The research analysts for this report has not served as an officer, director or employee of the subject company PL or its research analysts have not engaged in market making activity for the subject company
Our sales people, traders, and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all o the foregoing, among other things, may give rise to real or potential conflicts of interest.
PL and its associates, their directors and employees may (a) from time to time, have a long or short position in, and buy or sell the securities of the subject company or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the subject company or act as an advisor or lender/borrower to the subject company or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.
US Clients
This research report is a product of Prabhudas Lilladher Pvt. Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.
This report is intended for distribution by Prabhudas Lilladher Pvt. Ltd. only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor.
In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, Prabhudas Lilladher Pvt. Ltd. has entered into an agreement with a U.S. registered broker-dealer, Marco Polo Securities Inc. ("Marco Polo").
Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer.
Prabhudas Lilladher Pvt. Ltd. 3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai-400 018, India | Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209
www.plindia.com | Bloomberg Research Page: PRLD <GO>
top related