Bernstein SocGen Group has revised the price target for L&T Technology Services Ltd. (LTTS: IN) to INR4,680.00, up from the previous target of INR4,070.00.
Despite the increase in the price target, the firm has maintained an Underperform rating on the stock.
The analyst at Bernstein SocGen Group noted that the broad-based mid-cap IT services sector continues to show weakness, with LTTS not meeting growth and margin expectations. The company’s growth guidance has been retained at 8-10%+ year-over-year constant currency (CC%), but the analyst believes this target is at risk, considering the challenging quarterly growth rates of 4.5-7% required in the third and fourth quarters.
LTTS reported Earnings Before Interest and Taxes (EBIT) margins at 15.1%, which fell short of the consensus by 100 basis points. Despite this miss and upcoming wage hikes in the third quarter, the company has kept its margin expectations at 16%. The analyst expressed concern over the risk to the medium-term outlook and considered the risk-reward profile unfavorable.
The valuation of LTTS is also a point of contention for Bernstein SocGen Group, with the stock trading at approximately 35 times the next twelve months’ (NTM) Price to Earnings (P/E) ratio. Given these factors, the firm’s stance remains at Underperform for LTTS.
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