L&T Tech Q3 Results Review - Muted Growth, Guidance Cut; Cautious Outlook: Dolat Capital

Dolat Capital Report

L&T Technology Services Ltd. reported flat revenue growth QoQ in constant currency terms (our estimate: 1.5%), impacted due to seasonality and higher furloughs impact in plant engineering vertical (down 4.6% QoQ).

Operating profit margin stood at 18.7% (our estimate: 18.5%) up 50 basis points QoQ, led by improved productivity, offshore mix and forex gains partially offset by increase in selling, general and administrative.

However, L&T Tech expects 180-200 bps operating profit margin impact in FY24 on Smart World and Communication integration and expects to get back to 18% by H1 FY26.

Won five deal wins of $10 million plus total contract (three in Industrial products) and significant empanelment from Airbus for engineering capabilities. Hopeful to get back to growth track in Q4 (guided 3% QoQ growth).

View:

1. Caution on client spending in hi-tech,

2. Guidance cut by 50 bps and

3. SWC acquisition (dilutive margin) indicates potential weakness in growth story and thus do not offer good risk-reward.

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