LTTS – Outstanding Performance

LTTS has shown good output through the transportation and plant engineering segments which are supported by energy transmission, electric vehicles, ADAS (Advanced Driver Assistance System), and digital manufacturing.

Quarterly Earnings Results Walkthrough

LTTS reported their quarterly earnings results on 18th October 2022 for the quarter which ended on 30th September 2022. Net profit was reported at Rs 283 crore which is a growth of 22.5% from Rs 231 crore in the same quarter of the last financial year. Despite a brilliant growth in the net profit, the stock crashed 5% on the following day after the results were declared.

LTTS has delivered a good quarterly earnings result that beat majority estimates. The sequential CC (constant currency) revenue growth of 4.5 percent was driven by the transportation and the plant engineering segments. Large deal wins persisted during the quarter, with a $60-million win.

Attrition was reported at 24 percent, 90 bps higher than the previous quarter, which was unseen in other IT companies. Net hiring was at the very low in the last eight quarters. The management thinks that attrition has peaked out and might ease further.

LTTS won a large $60 million deal in Q2, as well as a $10-million deal. The large deal is in the transportation segment. While the company has not given any details, it is most probably the BMW’s 5-year deal for providing top-end engineering services for the company’s range of infotainment consoles directed towards its family of hybrid vehicles.

The management commentary tells us that business from the media and the entertainment industry has been weak which is due to the muted performance of the telecom & hi-tech segments.

Technical Analysis

LTTS Weekly Candlestick Chart on Sharekhan’s TradeTiger

LTTS seems to be resting on the 50% retracement level at Rs 3475 for a few months. The stock took strong support at its 61.8% retracement level at Rs 2889 and bounced back up. The price is hovering along the 100-day moving average. MFI is at 46. We may observe some bullishness in the coming months.

At the current market price of Rs 3495, LTTS is trading at an FY24 PE of 29x, which is very expensive and is rated at a 25 percent premium over the long-term average. However, there can be some bullishness from the current 50% retracement level, but the risk-reward ratio is not balanced in favour of new investment. Investors should hold their capital for correction for accumulation of this stock.

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