L&T Tech Q1 Review: Brokerages Split As Morgan Stanley Sees Gradual Recovery But Citi Stays Bearish
L&T Technology Services posted its first-quarter earnings for the current fiscal year, drawing a mixed bag of sentiments from Citi and Morgan Stanley. While both firms acknowledged the prevailing macroeconomic challenges, they took divergent stances on L&T Tech’s performance.
Citi Maintains ‘Sell’ Rating
Citi maintained a ‘sell’ rating, adjusting its target price slightly downward to Rs 4,015 from Rs 4,055, citing a weaker-than-expected quarter and persistent concerns. In contrast, Morgan Stanley held an ‘equal-weight’ rating, with a marginally increased target price of Rs 4,500 from Rs 4,300, suggesting that while the results were largely in line, the path to a recovery would be gradual, with limited immediate upside.
Morgan Stanley Sees Gradual Recovery
Morgan Stanley’s take is more measured, describing the results as having ‘no negative surprises’ and largely aligning with their expectations. A key positive highlighted by Morgan Stanley is consistent momentum on deal wins, with the company announcing 10 large deals worth over $200 million in the quarter. This marks the third consecutive quarter of achieving such a significant run rate, indicating a healthy pipeline that management expects to sustain.
Divergent Views on Mobility Segment
Citi’s primary concerns are around the mobility segment, which experienced a 1.5% sequential decline due to project pauses, delays, and some cancellations. They anticipate this segment will remain muted in the near term, with a potential turnaround expected only in the second half of the fiscal year. Morgan Stanley, on the other hand, believes the mobility segment will show growth from the second half of the fiscal year as current project pauses and deferrals subside.
Conclusion
While both brokerages acknowledge the prevailing macroeconomic challenges, their outlook on L&T Tech’s performance diverged. Citi maintains a ‘sell’ rating, citing concerns over the mobility segment and valuation multiples. Morgan Stanley, however, sees a gradual recovery and maintains an ‘equal-weight’ rating. The stock will be closely watched as investors await the company’s execution on its growth plans.
Conclusion: L&T Technology Services posted its first-quarter earnings, garnering a split in analyst sentiment from Citi and Morgan Stanley. While both firms acknowledged the prevailing macroeconomic challenges, their outlook on L&T Tech’s performance diverged.
