ICICI Securities Maintains Hold Rating on Larsen and Toubro Technology Services, Targets Rs 3380
Larsen and Toubro Technology Services Reports Missed Revenue Target in Q4FY26
Larsen and Toubro Technology Services (LTTS) has reported a revenue miss in the fourth quarter of fiscal year 2026, primarily due to the impact of the divestment of its Software and Communication (SWC) business. According to an ICICI Securities research report, the company's revenue growth was affected by this divestment, leading to a lower-than-expected revenue target.
Key Takeaways from the Report
The research report highlights several key takeaways from LTTS's performance in Q4FY26. Firstly, the company's automotive business is stabilizing, in line with the commentary provided by TELX. Additionally, LTTS has continued to experience positive traction in its sustainability business, with a broad uptick across various subsegments. Furthermore, the company has achieved a revenue compound annual growth rate (CAGR) of 13-15% till fiscal year 2031 under its Lakshya 31 program. The completion of the restructuring exercise as of Q4FY26 is also a significant development.
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Neutral Stance on LTTS
ICICI Securities maintains its neutral stance on LTTS, citing the importance of execution amid a slew of strategy and portfolio changes. While the company's management has provided a robust revenue growth outlook of 13-15% CAGR till fiscal year 2031, the research report estimates that the revenue growth in fiscal year 2027 will likely be in mid-single digits, considering the strategic pivot, leadership changes, and macro uncertainty.
Outlook and Recommendations
The research report maintains a HOLD rating on LTTS, with an unchanged one-year forward price-to-earnings (P/E) multiple of 22x. The target price for March 2027 is set at INR 3,380. Additionally, the research report has cut its estimated earnings per share (EPS) for fiscal years 2027-28 by 5-6% to factor in weaker estimated growth in the hi-tech vertical.
| Vertical | Fiscal Year 2027E | Fiscal Year 2028E |
|---|---|---|
| Hi-Tech | 10% | 5% |
| Other | 15% | 10% |
| Total | 12.5% | 7.5% |
This revised revenue growth estimate reflects the research report's cautious outlook on LTTS's performance in the coming years.
Investor Takeaway
Maintain a neutral stance on LTTS due to execution risks amid strategy and portfolio changes.
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