Services business grew strongly, with 5% CC QoQ. The P&P business declined due to seasonality, impact on margins due to supply-side challenges and investment | L&T Technology Services Q4FY22 Conference Call Highlights

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  • Q4FY22: Revenue of ₹1,756.1 Cr for the quarter; growth of 4.1% QoQ and 21.9% YoY.  Revenue of $232 million for the quarter; a growth of 3.1% QoQ and 17.5% YoY; in constant currency, a growth of 3.6% QoQ and 19.4% YoY. EBIT of ₹327.4 Cr for the quarter; EBIT margin at 18.6%. Net Income of ₹262 Cr for the quarter, growth of 5.3% QoQ and 34.7% YoY; Net margin at 14.9%.
  • FY22: Revenue of ₹6,569.7 Cr for the year; a growth of 20.6%. Revenue of $880 million for the year; growth of 19.5%; in constant currency, a growth of 20.0%. EBIT of ₹1,200.5 Cr for the year; EBIT margin at 18.3%. Net Income of ₹957 Cr for the year, growth of 44.3%; Net margin at 14.6%.
  • The EBIT margin remained flat at 18.6 percent as office and travel expenses started increasing, post-COVID normalization.
  • Utilization fell 80 bps and 380 bps on a QoQ and YoY basis, respectively.
  • Growth in Verticals (QoQ/YoY respectively): Transportation (7.8%/25.5%), Industrial Products (-0.5%/17.2%), Telecom and Hitech (1.1%/11.4%), Plant Engineering (3%/16.5%), Medical Devices (-0.2%/10.1%).
  • Growth in Geographies (QoQ/YoY respectively): North America (2.8%/19.1%), Europe (0.8%/13.6%), Rest of the world (-1.6%/-5.7%), India (9.5%/30.7%).
  • Relatively higher Last twelve months (LTM) Attrition rate (20.4% in Q4FY22 from 17.5% in Q3FY22)
  • LTTS continues to have a strong deal win trend and a solid pipeline. Deals worth $120 million in the EACV (electric automated connected vehicles) space is one of the largest in the company’s history, with a tenure of up to 6-8 years, beginning Q2FY23. The highest-ever TCV (total contract value) win in the quarter, including a $120 million-plus deal, a $25 million-plus deal, and four other deals with a TCV of $10 million-plus each.
  • In Q4, won a $100 million-plus deal in the EACV space – being chosen as the strategic engineering partner for a new age electric VTOL (Vertical Takeoff and Landing) aircraft program. With this deal, EACV’s success moves to Aerospace, reflecting multi-domain engineering and technology track record and expertise.
  • LTTS has indicated that wage hikes (to be implemented in H2FY23), and normalization of travel expenses are going to be major headwinds. Further, the voluntary workforce outflow is a pain for the IT sector. It is witnessing a 20-30 percent employee attrition, which despite measures to contain it, may become a significant risk.
  • Established a metaverse vertical within the company, and it is going to be headquartered in Chennai.
  • Return on equity (ROE) of 25% for the year.
  • FY23 Guidance: Constant currency revenue growth of 13.5-15.5 percent in FY23.

Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell stocks or MF.

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