L&T Technology advances 10% ahead of Q3 results; surges 50% in 3 months

Shares of L&T Technology Services (LTTS) moved higher by 10 per cent to Rs 2,621 on the BSE in the intra-day trade on Tuesday on the back of heavy volumes ahead of its October-December quarter (Q3FY21) results. The company said it will announce its results for the third quarter of FY21 on Wednesday, January 20, 2021 post market hours.

The stock of LTTS, a subsidiary of Larsen & Toubro (L&T) focused on engineering, research & development (ER&D) services, hit a record high of Rs 2,780 on Friday, January 15, 2021.

In the past three months, post July-September quarter (Q2FY21) earnings, LTTS has outperformed the market by surging 50 per cent as compared to a 22 per cent rise in the S&P BSE Sensex. The trigger for the recent rally has been the multiple deals that the company has won in the ongoing December quarter and expectations of a recovery in the (ER&D) segment.

While announcing Q2 results on October 19, 2020, the management said it is confident that the growth momentum will continue with the steady order bookings and a healthy pipeline across all segments.

Besides, the management believes that the worst is behind now given the initial signs of a new normal, higher demand for digital and leading-edge technologies and absence of any indication for ramp-down of any projects. It had raised its annual revenue growth guidance as they expect a decline of 7-8 per cent in dollar revenues for FY2021 versus a 9-10 per cent decline expected earlier, translating into a 3.4-4.8 per cent quarter on quarter (QoQ) growth for the remaining quarters of FY2021.

Brokerage firm Phillip Capital expects LTTS to post strong dollar revenue growth of 4.1 per cent QoQ. It also expects growth to be broad-based across verticals. "The margins are likely to expand by 70 bps QoQ, led by revenue growth, cost optimization measures and also helped by the absence of wage hikes. Investors must watch out for commentary on ER&D spending, the outlook for FY21, vertical commentary, deal pipeline and conversions and guidance," it said in its results review.

Sharekhan, meanwhile, expects LTTS' revenue to grow by 4.5 per cent on a QoQ basis. It expects sequential growth in its each vertical despite weakness in oil and gas and aero sub-segments. Moreover, the brokerage expects LTTS to retain its FY2021E growth guidance i.e. revenue decline of 7 per cent-8 per cent. "The key monitorables would be commentary on large deal wins and pipeline and outcome of annual budgeting cycle of clients; capital allocation and M&A activity; margin outlook, given pricing pressure; update on recovery of margin to its earlier levels; ER&D budgets of large enterprises and assumption on the return of normalcy of discretionary spend," it added.

At 12:49 pm, LTTS was trading 8.5 per cent higher at Rs 2,578 on the BSE as against a 1.29 per cent gain in the S&P BSE Sensex. The trading volumes on the counter jumped over three-fold with a combined around 840,000 equity shares having changed hands on the NSE and BSE till the time of writing of this report.