After muted numbers in the past few quarters, the Street expected little from L&T Infotech (LTI) in its second-quarter results. However, the company, which declared its results last week, managed to meet estimates.
More importantly, the second quarter of this financial year is expected be a better one for company, especially on account of a ramp-up in existing deals, large deals won in recent quarters, and lower client-specific issues.
Flattish revenue trends over the past few quarters at its top clients were seen as a major concern by the company and the Street. Its top-five clients, for instance, contributed 38 per cent to LTI’s revenues in Q2FY18; this fell to 31.3 per cent in Q1FY20, down 670 basis points.
But the trend now seems to have reversed: Its top-five clients accounted for 31.7 per cent of the company’s revenues in the September quarter. Analysts at HDFC Securities say that the two buckets of top-five as well as clients in the 6-10th positions in terms of contribution to revenues have recovered. The share of top-five clients grew 3.4 per cent sequentially after three quarters of muted performance, they add.Another key trigger for the company is its large deal wins, with a total contract value of $100 million from financial services, energy and utility segments. The revenue momentum in the second half of the year is expected to be led by a ramp-up in large deals won and a traction in larger client accounts.
Analysts expect the company to deliver double-digit revenue growth in dollar terms over the next couple of years. Analysts at Motilal Oswal Research say that among Tier-II firms, the company remains well positioned in terms of a strong portfolio, good execution capabilities and a high-quality management team. Analysts expect the company, which is trading at 19 times its FY20 estimates, to continue commanding a premium over its peers...READ MORE
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