multibagger it stock: After rebounding 1,000% in 5 years, this IT stock is showing weakness. What awaits us?
To add to that, the March quarter results were a shortfall for both revenue and margins as the IT company bears the burden of high expectations. Analysts said that while Larsen & Toubro Infotech remains a good growth story, lofty valuations could keep the stock capped higher.
“We remain confident in management’s ability to execute, but stay away from the stock, due to a significant revaluation. We value the stock at 30 times FY24 EPS. Our target is to 5,710 rupees per share,” Motilal Oswal said. Securities.
This target suggests a mere 4% upside potential for the stock.
L&T Infotech said revenue increased 3.1% sequentially and 27.5% year-on-year to $570.4 million, which was below Street’s estimate of $571.6 million. of dollars. Sequential growth of 3.6% in constant currency on a high basis also fell below the 4.2% estimate.
Revenue growth for the March quarter was lower than the past two quarters due to seasonality and increased on-site supply issues. Over the past two quarters, the IT company had posted more than 8% sequential revenue growth.
Profit for the quarter increased by 17% year-on-year to Rs 637.50 crore.
L&T Infotech said it could deliver peak growth in fiscal 2023 and kept the net profit margin target unchanged in the 14-15% range. But analysts have slightly lowered their growth forecasts.
“We have reduced FY2023-24E EPS by 2-3% to account for margin headwinds. We like the scalability attributes of LTI’s business, but find current valuations expensive” , Kotak said while reducing its target on the action to Rs 5,500 from Rs 6,130 earlier.
Morgan Stanley said Larsen & Toubro Infotech reported “a complete miss” on revenue and margins. Demand trends are secular, but supply-side challenges persist, he said. This brokerage reduced its profit estimates for FY23 and FY24 by 4-5% and maintained its “underweight” rating on the stock with a target of Rs 5,500.
The certificate closed at Rs 5,486.15 on Wednesday.
Analysts said L&T Infotech was seeing increased macroeconomic uncertainty, but no impact on demand.
Emkay Global cut its FY23 and FY24 EPS estimates by 3.7% and 2.5%, respectively, taking into account the missed fourth quarter performance and weak first half on-site volume. It maintained a Hold rating on the stock with a revised target of Rs 6,350 from Rs 6,500 earlier.
HDFC Institutional Equities said the IT company has shown consistency in mix, with FY18-22 revenue nearly doubling and heading for a 40% increase from FY22-24E.
“After a CAGR of 17% in earnings over the past five years, LTI is expected to generate an 18% CAGR in earnings in FY22-24,” the brokerage said while suggesting a target of 6 185 rupees on the action.