New Delhi Mid-cap IT services provider L&T Infotech (LTI) has once again impressed the market with its impressive earnings performance. In the September quarter, the company reported a massive $509 million in revenue, ahead of consensus estimates of 8.9% and 3.5% revenue growth on a sequential basis in constant currency terms. Growth was broad-based across vertical, geographic and service sectors. Responding to Q2FY22 earnings, shares of the company rose 10% on the NSE in early trade on Tuesday.
Its deal winning momentum and deal pipeline remained in good shape. LTI won a new great deal in Europe with a total contract value of ₹30 crore for five years In a post earnings conference call, the company’s management said that the deal pipeline is strong with several large deals. Management further stated that LTI’s growth is constrained only by supply and without which the company would have grown at a much higher rate in the backdrop of extremely strong, secular and sustainable demand environment. The company’s management remains confident of top-quartile revenue performance and expects revenue of at least $2 billion in FY22 on strong demand and good progress on customer mining.
Ebit margin at 17.2% rose more than 80 basis points (bps) on a sequential basis, beating the consensus estimate of 16.9%. Ebit is short for earnings before interest and tax. One basis point is one hundredth of a percentage point. Despite supply-side cost pressures, margins have been aided by the ever-increasing offshore mix, which now stands at 83.6%, analysts say.
Another highlight of the quarter was LTI’s total workforce of 4,084, up 11% sequentially and the highest ever in the company’s history. With strong net growth over the past few quarters, LTI’s total workforce has grown by 31% year-on-year. In addition, LTI has increased the fresher hiring target to 5,500 with one-two years of experience in FY22 and targets to hire 4,000 resources. It should be noted that its attrition has increased to 19.6%, up 440bps quarter-on-quarter.
“LTI’s deep domain capabilities, strong partnerships with hyperscalers and strong sales engines will continue to drive industry-leading growth rates. We expect revenue CAGR of around 23% in USD terms over FY21-23E, which is at the top end of our Tier-II IT coverage universe, analysts at Motilal Oswal Financial Services Ltd said in a report. . CAGR is low annual growth rate for Compounded.
However, the domestic brokerage house has cautioned against expensive valuations of the stock. “While we have confidence in the company’s execution capabilities, we remain behind a significant valuation re-rating,” Motilal’s report said. LTI is trading at one-year forward price-to-earnings multiple. 40 times, which is more than some Tier-1 peers.
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