L&T Infotech shares rally 10 times in five years

L&T Infotech shares rally 10 times in five years

You might need a lot of patience on high conviction bets to get a multibagger return. Information technology firm Larsen Toubro Infotech LTI, which disappointed investors in the initial months of the 2016 listing, is one such firm in the listed space on Dalal Street. The company's shares have rallied over 10 times in the past five years. The scrip has moved 938 per cent higher to Rs 6,781. Market watchers held a mixed view on the company after the analyst day on December 9. Prabhudas Lilladher holds a Buy rating on Larsen Toubro Infotech with a target price of Rs 6,710, while Ambit Capital gave a Sell call to the IT firm with a target price of Rs 4,000.

L&T Infotech s senior management stated that their strategy was to keep up with a track record of revenue growth, scaling up tech capabilities, mining existing strategic clients, investing in new high potential verticals and markets and building sales and marketing teams. Demand continues to be strong across all verticals, markets and service lines, according to the management.

The revenue of the company has increased by more than 16 per cent CAGR to Rs 12,369. The past five years, 80 crore were spent there. Net profit has increased by 18.30 per cent CAGR to Rs 1,938. During the same period, 20 crore were spent.

Prabhudas Lilladher believes that LTI s strategy to sustain profit after tax margins are 14 -- 15 per cent and invest back into business for building capabilities for the future will help it gain a higher market share and maintain its position in the leader's quadrant.

Anand Rathi Share and Stock Brokers has a Hold rating on the LTI with a target price of Rs 6,960. It believes that medium-term demand is likely to be high on increased digital spending and high developed-world attrition.

On the other hand, Ambit Capital added that profit after tax of L&T Infotech to be at the lower end of the guided band of 14 -- 15 per cent over FY 23 and FY 24 and look for an EPS CAGR of 13.7 per cent over FY 21 -- 24 E.

Mphasis Buy within tier 2 IT, trading at around 23 per cent discount to L&T Infotech, despite stronger growth within its direct business and better margin stability, Ambit Capital said in a report.

The domestic IT industry is showing strong growth momentum and management of most of the companies are confident in the growth story for the next 4 -- 5 years.

According to the head of research at the LTI, Santosh Meena, said L&T Infotech is one of the fastest-growing IT firms and its management reiterated its guidance for strong broad-based growth for the coming 3 5 years. The growth momentum is likely to continue with more than a 15 per cent margin on the back of a strong demand outlook. LTI's management highlighted Great Restructuring as a key growth driver, where the next leg of revenue growth will be driven by cloud, data and digital services.

Technically, LTI is in strong bullish momentum where it may go towards Rs 9,000 in the next 6 -- 8 months, while Rs 11,000 looks a possibility in the next 1 -- 2 years. On the downside, Rs 6400 is acting as a near-term base while the Rs 6,000 -- 5,600 area will be a critical support zone at any meaningful corrections, Meena said.