L&T Infotech surges 10%, nears record high on robust Q2 results

Shares of Larsen & Toubro (L&T) rallied 10 per cent to Rs 6,496.40 on the National Stock Exchange (NSE) in Tuesday’s intra-day trade after the company reported the strongest sequential revenue growth, its best ever for the July-September quarter (Q2), at 8.9 per cent in constant currency terms.

The stock of the L&T group information technology (IT) consulting & software company was trading close to its record high of Rs 6,498.50 touched on September 24, 2021.

L&T Infotech on Monday reported a net profit of Rs 552 crore for the second quarter ended September 30, 2021 (Q2FY22), up 21 per cent year-on-year (YoY) and 11 per cent sequentially. Strong demand led to revenue growth of 25.6 per cent YoY at Rs 3,767 crore, while the figure was up 8.8 per cent sequentially.

Growth was broad-based across verticals, service lines, geographies and client buckets. Broad-based industry growth was led by BFS and manufacturing. The company’s earnings before interest and tax (EBIT) margin expanded 350 basis points (bps) YoY and 270 bps quarter-on-quarter (QoQ) to 19.9 per cent during the quarter. Ebit margins expansions led by SG&A leverage, offshoring, and higher working days, partially offset by utilisation and higher costs.

The management said that this was the strongest sequential growth the company has witnessed, taking its annual revenue run rate to cross $2 billion. It expects demand to remain strong over the next three years. Despite the absence of large new deal wins in recent quarters, L&T Infotech’s growth momentum is one of the strongest in its history, indicating the broad-based nature of the demand environment, the company said.

The board has declared an interim dividend for the financial year 2021- 22 of Rs 15 per equity share of the face value of Re 1 each.

The company has fixed October 26, 2021, as record date to ascertain beneficial owners of equity shares to get interim dividend.

Motilal Oswal Financial Services expects better margin in 2H (v/s 1HFY22), driven by continued strong growth, which will offset the supply-side impact. "The management continues to be focused on driving growth with a stable margin. We expect the net margin to remain in the guided range of 14-15 per cent," the brokerage firm said in a results update.

The brokerage also raised its FY22E/FY23E EPS by 7 per cent on the back of strong demand outlook, resulting in revenue upgrades. “Our margin estimates continue to be in line with the management’s guidance. As Digital turns mainstream, we expect L&T Infotech to benefit from continued investments in Digital capabilities, strong client additions, and its mining abilities. This should result in industry-leading growth,” it added.