- 20 Jan 2022
- ICICIdirect Research
LTI EBIT margin expansion stands out among large size peers
News: Larsen Toubro Infotech (LTI) reported robust numbers, especially on margins where the margin expansion was a standout compared to large sized peers. The company’s constant currency revenues increased 9.2% QoQ while dollar revenue increased 8.6% QoQ to US$553 mn (adjusted to pass through income, growth was 6.6% QoQ ). EBITDA margin improved by 60 bps while EBIT margins improved 70 bps QoQ to 20.1% and 17.9%, respectively, aided by a strong operating performance. The growth in constant currency revenues was mainly driven by banking financial services (up 10.4% QoQ and Manufacturing (up 19% QoQ) while insurance growth was muted at 2.2% QoQ. In terms of geographies, the growth was aided by North America (6.3%), Europe (8.7%) and India (59% on low base) while RoW was down 4.3%. LTM Attrition has increased 290bps QoQ to 22.5%. LTI also announced a multiyear deal (TCV of US$31 mn) in the US pharma space.
Views: The EBIT margin expansion was the highlight of the quarter since large size peers reported +10 to -190 bps QoQ margin swing amid pressure due to supply side challenges. This reflects better cost control at LTI. DSO days increased by five due to license procurement for one of its client, which happened on the last day of the quarter. The company’s offshoring mix also improved by 240 bps YoY, which is also supporting margins in our views.