L&T Technology Services Shares Surge Nearly 15% After Q2 Earnings Beat Estimates
Shares of L&T Technology Services (LTTS) surged nearly 15% on Wednesday after the engineering services company reported better-than-expected second-quarter earnings. The rally marked its strongest intraday gain since July 15, 2021, when shares had jumped 18.9%. However, the stock later pared gains and was trading 7.4% higher in the afternoon session. Despite the recovery, LTTS remained 11% lower…
L&T Technology Services, an engineering services provider, experienced a significant 15% share price increase on Wednesday following release of its Q2 earnings report. The company's performance surpassed analyst expectations, demonstrating robust growth potential. The surge came after the firm reported revenue growth of 2.7%, outpacing the projected 1% to 1.2% increase. Moreover, LTTS' earnings before interest and taxes margin expanded by 60 basis points to 16.3%, exceeding the previously estimated 16%.
The financial results showcased a strong annual profit, with net profit climbing 66.8% YoY to ₹548.2 crore, while profit after taxes rose 53.7% to the same figure. A notable one-time gain of ₹165 crore from divesting its SWC business contributed to this growth surge. Excluding discontinued operations, profit experienced a 7.9% increase.
LTTS also disclosed an annualized revenue of $120 million from engineering intelligence-led solutions by the end of September 2024. A significant portion of the quarter's contract value ($50%) was attributed to contracts encompassing artificial intelligence-related services. The firm anticipates margin impacts due to upcoming wage hikes, projecting a reduction in margins by 50 to 80 basis points. However, LTTS expects to maintain its robust margin levels around 16%.
The management reaffirmed its five-year revenue growth objective of 13% to 15% annually, accompanied by a target margin range of 16% to 17%. As a part of this interim dividend announcement, the company declared a ₹20 per share dividend, fixing October 27, 2026, as the record date. Following the positive results, several brokerages heightened their target prices for LTTS shares.
IDBI Capital Markets upgraded LTTS from a 'hold' rating to a 'buy' rating, adjusting its target price from ₹3,625 to ₹4,170. Out of the 33 analysts covering the stock, 16 recommend buying, 12 advise holding, and five maintain a sell rating. The stock upgrades were driven by the company's impressive quarterly performance and the increasing contributions of AI-related engineering services.
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