On Friday, shares of L&T Technology Services (LTTS) nailed a new high of Rs 4,412.80, rising 9 per cent on the BSE in the intra-day trade, after the management managed $1.5 billion revenue and 18 per cent earnings before interest tax (Ebit) margins by FY25 on the solid demand outlook.
In the past three months, the stock has surged 62 per cent compared to an 11 per cent growth in the S&P BSE Sensex.
The revenue guidance incorporates acquisitions, while Ebit margin guidance contemplates expensive travel costs, sustained investment in tech and human resources and acquisitions.
The management has intimated that digitization is pushing expedited spends in engineering, research and development (ER&D) and should serve it due to substantial capabilities, multi-vertical presence, and solid wallet share. Given this, Motilal Oswal Financial Services analysts expect LTTS to deliver strong revenue growth over the coming years. They have clutched the stock as their top pick in the midcap IT Services space.
The brokerage firm announced in a company update, "The management has provided a strong outlook, which implies a growth momentum of around 20 per cent over FY21-25E. Moreover, it reiterated its focus on keeping its guidance achievable, despite client and attrition related risks. We see this as an indication that there can also be potential upside risk to its aspiration of $1.5 billion revenue by FY25".
It further added that the management is assured of securing a segmental margin despite the near-term headwind from a stable supply environment. Furthermore, its medium-term margin outlook of around 18 per cent EBIT signifies a margin expansion.