Motilal Oswal Places Buy On Midcap IT Sector Stock, Scrip To Trade 1500% Ex-Dividend On July 24

Motilal Oswal Financial Services initiates coverage on L&T Group's firm, L&T Technology Services Ltd. (LTTS) with a Buy call for a target price of Rs 4,760 apiece. The brokerage sees a 15% upside in the share price, considering the given target price by the brokerage firm. LTTS is an IT Sector midcap company. The company has a market cap of Rs 43.790.31 Crore.

The stock of LTTS is set to trade ex-dividend on July 24, 2023. The Board of Directors of LTTS recommended 1500% final dividend i.e. Rs 30/- per equity share of face value of Rs 2.00/- each.

Dividend & Record Date

In a regulatory filing on April 26, 2023, the company said, "we would like to inform that the Board of Directors at their meeting held today, have recommended a final dividend of 1,500 % i.e. Rs. 30/- per equity share of face value of Rs 2.00/- each, subject to approval of the shareholders of the Company, which if approved, shall be paid/dispatched within thirty days from the conclusion of the Annual General Meeting of the Company. The Record date for the purpose of final dividend shall be intimated later."

"The Final Dividend if approved at the AGM shall be paid by the Company on or after July 24, 2023," the company said in an exchange filing on June 12, 2023.

Shifting of business from 1Q to have minimal impact

The brokerage said, "L&T Technology (LTTS) posted muted revenue of USD280m in 1QFY24, down 2.9% QoQ CC after adjusting for the SWC acquisition. Organic revenue growth of 0.6% QoQ CC/7.5% YoY CC missed our estimate of 2.4% QoQ due to push-out in the execution of few deals. Despite the revenue miss, LTTS management has reiterated its FY24 revenue growth guidance of 20% YoY (10% YoY organic), highlighting the ramp-up in deals from Jun'23 onward."

It added, "EBIT margin declined 160bp QoQ due to the impact of the SWC acquisition (70bp on restated base) to 17.2%, in line with our estimate. LTTS has reaffirmed its FY24 EBIT margin guidance of 17%+ and expects to return to its historical margin level by FY26. It announced six USD10m+ deal wins (one USD50m+), which suggests a big jump in deal TCV vs. last quarter."

Valuation and view

Motilal Oswal Financial Services Said, "Digitization is boosting spending in ER&D, and LTTS should benefit due to its strong capabilities, multi-vertical presence, and solid wallet share. We expect the company to deliver strong revenue growth over the coming years. Our TP of INR4,760 implies 31x FY25E EPS. We expect industry spending to improve vs. the preceding five years. We retain our BUY rating on the stock."

Stock Outlook

On Wednesday, the shares of LTTS closed 1.098% higher at Rs 4,144.15 apiece. It traded 52-week high at Rs 4316.75 apiece and 52-week low at Rs 3,135.35 apiece, respectively. The stock has given 7.59% positive return in 1 week. It gave 20.58% positive return in 1 month and 21.91% in 6 months, respectively. It gave 29.84% positive return in 1 year, 21.94% in 2 years, and 200.52% in 3 years, respectively.

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