L&T infotech

[Srilata Rao]

L&T Infotech Ltd is pick of the week of Axis Securities

LTI is a global technology consulting and digital solutions company helping more than 420 clients succeed in a converging world, with operations in 32 countries. LTI helps clients in digital transformation with LTI’s Mosaic platform enabling clients mobile, Analytics, IoT and cloud journeys.

Investment Rationale

 Robust business structure in global uncertainties: LTI may face short term impact of COVID 19 outbreak but company has been efficiently managing from remote systems to ensure timely delivery of the outsourced business. The management has indicated that LTI is managing all its ongoing projects efficiently with complete employee engagement using WFH mode. The COVID impact, if any, would be seen on consulting business while employee engagement in outsourcing and automation business remains robust. LTI has strong deal wins and ramp up in large deals in previous quarters will help LTI to generate more sustainable revenues as compared to its peers even in Q4 FY20.

 Strong sustainable strategy aided by digital transformation and channel partner: IT service provider’s engagement with its partner network has expanded beyond certifications into setup of co-innovation centers, building industry solutions, ISV partnerships and joint sourcing of deals. These partnerships play a significant role in implementation, rollouts & upgrades, validation and support services. Recent deal trend continues to be healthy for LTI and is reflective of traction in Retail & CPG, Manufacturing and BFSI verticals. LTI will continue to invest in Digital Talent and S&M which is imperative to drive growth. We believe that COVID outbreak will create huge opportunity across geographies for LTI to post strong organic growth over different verticals.

 Healthy broad based growth: LTI Management is optimistic & confident about the future growth potential capitalizing its core strategy (Digitizing the core, Data-driven organization, Experience transformation, and Operate to transform) with customer centricity as the key engagement tool. LTI’s sales strategy (hunting pack) has been yielding good results, which is evident from their stronger annual growth in large deal pipeline. LTI had secured 2 large deals with net new TCV of ~US$75 mn+ in Q3FY20 taking it to US$219 mn+ for 9MFY20; ramp-up of these deals and a strong exit rate in Q4FY20 would auger well for pick-up in revenue growth in FY21.

 We recommend Buy with target price of Rs 1,744.

[valuepicker]

L&T infotech has been showing robust pipeline regular large size deal wins. LTI Mindtree merger will happen in one year time the current marketcap of combined entity is 55,000 cr which has potential of reaching 150,000 cr in 3 years timeframe. So it's a future largecap and being on radar of many PMS funds, MFs and FPIs. Merger of LTI and Mindtree will transform this ugly duckling into swan

[valuepicker]

The ugly duckling L&T infotech has become a swan with market cap of72000 cr
which is app 10 b us$. This transformation has happened faster than expected.
Now with such a impressive performance, it has caught attention of FII and FPI.
This is resulting in lot lot of liquidity driving it up. Next year L&T infotech
Will complete 25 years and before that there will be 2 major events
1. Merger of Mindtree with L&T infotech
2. Bonus share 1 :1
This is going to drive the newly transformed swan in a new trajectory
Huge digit pipeline of orders, strong balace sheet will compound this stock at
25% for the next 5 years. Those who missed the bus can still buy at current levels
From of 3 years perspective