L&T Infotech shares gain 3% post Q3 earnings: Should you buy, sell or hold?

Shares of L&T Infotech (LTI) rose 3.5 per cent to hit an intraday high of Rs 6,928 on BSE after the company reported its earnings for the quarter ended December 2021.
 
LTI, the infotech arm of EPC major Larsen & Toubro, reported an 18 per cent growth in its net profit to Rs 612.5 crore for the December 2021 quarter, on higher revenues.
 
The city-based company's revenue from operations increased 31.2 per cent to Rs 4,137 crore, and was 9.8 per cent higher than the preceding September 2020 quarter.
 
With a market capitalisation of more than Rs 1,18,000 crore, the shares stand higher than 100 day and 200 day moving averages but lower than 5 day, 20 day and 50 day moving averages.
 
Managing Director and Chief Executive Officer Sanjay Jalona said that the company hired over 1,200 people on a net basis during the quarter to take its overall employee strength to 44,200, and will continue hiring as the business grows.
 
He added that the attrition, which shot up to 22.5 per cent as demand for talent soared, will also come down.
 
"LTI reported its highest ever growth of 9.2% QoQ CC, ahead of our estimate of 7.1%. While growth was broad-based across verticals and service lines, 3QFY22 benefitted from pass-through of revenue in India," Motilal Oswal said.
 
"We have not tweaked our FY22 numbers materially, but raised our FY23E EPS by 2% on a strong demand outlook as per earlier indicated trends. Our margin estimates continue to remain in line with the management’s guidance," the brokerage house said in its report.
 
"As Digital turns mainstream, we expect LTI to benefit from continued investments in its Digital capabilities, strong client additions, and mining abilities. This should result in industry-leading growth. Our target price of Rs 7,170/share implies 36x FY24E EPS. We maintain our Neutral rating," it added.
 
"Our EPS estimates increase by 1.7%/3.4% for FY23/24E led by an increase in revenue growth estimates. We arrive at DCF based target price of Rs 7503 from earlier Rs 7239 (implied target multiple of 39x P/E on FY24 EPS)," Prabhudas Lilladher said.
 
"LTI is currently trading at 41/35x earnings multiple on EPS of 164.6/191.7 for FY23/24E with revenue/EPS CAGR of 20%/21% over FY22-24E. LTI continues to remain one of our preferred picks in midcap IT space," the brokerage house added.