From ₹700 to ₹5,875: This largecap IT stock delivered 8 times return in 6 years
Larsen & Toubro Infotech, the country’s sixth-largest software exporter, has delivered more than 8x returns to its shareholders in the last six years, between 2016 and 2022. The L&T Group share has recorded more than 700% gains since its listing on the domestic exchanges in July 2016. On July 21, 2016, L&T Infotech stock ended at ₹697.65 as compared to its issue price of ₹710 on the BSE.
The IT unit of Larsen and Toubro (L&T) has rallied as much as 742% during the last six years, with the stock price surging from ₹697.65 on July 21, 2016, to ₹5,875 intraday today. The surge in stock price can be attributed to solid business performance supported by company’s healthy deal pipeline, diversified service offering across multiple verticals. It was also benefitted from the strong brand and domain expertise available within the L&T Group, resulting in better penetration and acceptability in the market.
If an investor had invested ₹1 lakh in L&T Infotech shares 6 years ago, the corpus would have been worth ₹8.42 lakh today.
According to the BSE data, the scrip has outperformed its sectoral peers in terms of one year return. It has gained 52% over the past one year, as compared to 9.6% growth in BSE benchmark Sensex. Meanwhile, IT sector heavyweight Tata Consultancy Services (TCS), the country’s largest software exporter, surged 17% over one year period, Infosys rose 30%, Wipro 29%, HCL Technologies 17%, and Tech Mahindra 43%.
L&T Infotech is the sixth largest Indian IT services player with a market capitalisation of ₹1.02 lakh crore and an employee base of around 36,000 at the end of March quarter of 2021.
As many as six analysts have given "strong buy" rating to the stock, nine have recommended "buy" rating, while five have assigned "sell" rating. Meanwhile, eight analysts have given "hold" rating, while three have recommended "strong sell" rating to the IT share.
Analysts have given an average target price of ₹7,346.33, which represents an upside of 25% from the latest price of ₹5,875.
“L&T Infotech continues to see robust demand. It remains confident that the demand will sustain for the next three to five years. We believe L&T Infotech will continue to deliver industry-leading growth. The stock is trading at 31.8x FY23E,” Edelweiss Securities said in a report dated January 19, 2022.
Analyst at Edelweiss Securities has maintained a "BUY/SO" rating with a revised target price of ₹7,750, citing broad-based growth and management’s optimistic view on future outlook. The rating agency highlighted that rapid changes in technology, intense competition in IT services, high dependence on limited clients and adverse exchange rate fluctuations remain key risks for the company.
For the third quarter ended December 31, 2021, the company reported a robust set of numbers, with consolidated net profit growing by 18% to ₹612 crore, as compared to ₹518 crore in the year-ago period. Revenue from operations surged 31% YoY to ₹4,137 crore, driven by broad-based growth across verticals and service lines.
In the Q3FY22 earnings report, the company's management highlighted that it was the best ever quarterly sequential growth since listing. The management has given guidance of 14-15% growth in profit margin for FY22.
On Wednesday, L&T Infotech shares opened lower at ₹5,807 against the previous close price of ₹5,852 on the BSE. During the session so far, it touched an intraday high and low of ₹5,875 and ₹5,771, respectively. The stock was trading higher than 5-day and 200-day moving averages but lower than 20-day, 50-day, and 100-day moving averages.