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L & T Technology Services Q1 FY22 Conference Call Highlights | Invest Yadnya

L & T Technology Services Q1 FY22 Conference Call Highlights

Published on 23 July 2021 .Views 33 .Comments 1
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In USD terms, L&T Technology Services share analysis had sequential revenue growth of 4.2% QoQ and crossed the $800 million run rate on an annualized basis. Growth was broad-based with 4 of 5 segments growing in the range of 4% to 8% led by Industrial Products. The EBIT margin of 17.3% despite wage hikes reflects the gradual portfolio shift towards more digital engineering as well as operational efficiencies around the hiring of freshers, cross-skilling, productivity improvements, and cost optimization. They won 11 deals across all segments, out of which 6 deals were 10 million-plus - two of these were actually 25 million-plus TCV.

As part of the strategy to build scale in core new technology areas, they have identified 6 strategic investment areas: electric autonomous connected vehicles (EACV), 5G, Med-tech, digital manufacturing, AI&ML driven smart products, and sustainability. On the innovation front, they filed 23 patents in Q1, this is a record high.

L&T Technology Services Financials: L&T Technology Services Financial Report

  • Revenue: 1,518 crores, a growth of 5.4% on a sequential basis.

  • Back on double-digit year-on-year growth with Q1 revenue up 17% year-on-year.

  • EBIT margin crossed 17% in Q1 making it the 4th consecutive quarter of operating margin improvement. The 70 basis points sequential improvement in EBIT margin to 17.3% was driven by portfolio shift towards digital engineering, operational efficiency measures including productivity improvement, cost optimization, and rupee depreciation that together helped fully observe wage hike, higher subcontracting, and third-party contracting expense.

  • Net Income for the quarter stood at 216 crores which are 14.2% of revenue, and up 11% on a sequential basis driven by higher revenue and operating margin.

Segmental Performance: L&T Technology Services Value Research

  • Transportation: Sequential growth of 4.3% led by strong demand in electrification-led programs and platform development across both Auto and Trucks and Off-highway.

  • Plant Engineering: 4% QoQ growth with growth being driven by FMCG followed by Oil & Gas and Chemicals.

  • Industrial Products:  8% QoQ growth with all three sub-segments showing good growth - Electrical, Machinery, and Building automation.

  • Telecom and Hi-tech: growth rate is 4% driven by Semi, Consumer Electronics, and Telecom.

  • Had a soft quarter in medicine. Looking to improve. But they see the outlook improving for diagnostic devices with the rising vaccine penetration in the US and Europe.

  • Our Digital Engineering revenues were 54% in Q1 versus 52% in Q4. We see this trend continuing.

Revenue Mix- Geography-wise: L&T Technology Services Share Price

North America:  62.3%, 5.5% QoQ, 22.4 %YoY

Europe: 16.8% , 4.8% QoQ, 26.1%YoY

India: 12.9%, 2.9% QoQ, 19%YoY

Rest of the world: 8%, -4.7% QoQ, -1.1%YoY

Clientele: L&T Technology Services Fundamental Analysis

  • No of active clients = 305

  • No of 1 Million dollar + = 122

Human Resource: L&T Technology Services  Share Analysis

  • Total Headcount 16,972

  • Attrition (LTM)% :  14.5%

Deals: L&T Technology services Result Analysis

  • An American automotive supplier has selected LTTS as a strategic partner to provide engineering services for their EV and Power Electronics product portfolio. LTTS will also be setting up a center of engineering excellence which will be leveraged by the global technology teams in North America, Europe, and Asia.

  • A global aerospace and defense company has awarded LTTS a program to support end-to-end engineering activities in a managed serviced model. The scope of work includes ownership of select R&D, lab activities as well as testing and certification infrastructure projects.

Guidance: L&T Technology Services Annual Report & L&T Technology Services Reviews

  • Strong demand outlook in both US and Europe, while in Japan and India the decision-making environment is slowly recovering.

  • Raised the USD revenue growth guidance to 15% to 17% for FY22.

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