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L&T Tech Q2 Review – Well Positioned To Benefit From Strong Growth In Digital Engineering: Prabhudas Lilladher

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Prabhudas Lilladher Report

L&T Technology Services Ltd. reported strong revenue growth of up 5.7% QoQ U.S. dollar, above our and consensus estimates (our estimate: 5%, consensus: 3%).

Growth was led by industrial products (up 8.6% QoQ U.S. dollar), transportation (up 6.2% QoQ U.S. dollar) and strong recovery in medical devices segment (up 9.6% QoQ) after soft performance in last two quarters.

L&T Tech’s consistent improvement in Ebit margin for five consecutive quarters led to highest ever margin of 18.4% up 116 basis points QoQ despite high supply side cost pressures, driven by productivity gains and revenue growth leverage.

We believe that margins may not sustain at these levels and will come back to ~17.3% in H2 FY22 given headwinds from rising attrition, probable wage hike and come-back of travel and facility costs.

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