Shares of L&T Technology Services (LTTS) hit a new high of Rs 4,412.80, surging 9 per cent on the BSE in the intra-day trade on Friday, after the management guided for $1.5 billion revenue and 18 per cent earnings before interest tax (Ebit) margins by FY25 on strong demand outlook. In the past three months, the stock has rallied 62 per cent, as compared to a 11 per cent rise in the S&P BSE Sensex.

The revenue guidance includes acquisitions while Ebit margin guidance takes into consideration elevated travel costs, continued investment in tech and manpower and acquisitions.

The management has indicated that digitization is driving accelerated spends in engineering, research and development (ER&D) and should benefit it due to strong capabilities, multi-vertical presence, and solid wallet share. Given this, analysts at Motilal Oswal Financial Services expects LTTS to deliver strong revenue growth over the coming years. They have retained the stock as their top pick in the midcap IT Services space.

“The management has provided a strong outlook, which implies a growth momentum of around 20 per cent over FY21-25E. Moreover, it reiterated its focus of keeping its guidance achievable, despite client and attrition related risks. We see this as an indication that there can also be potential upside risk to its aspiration of $1.5 billion revenue by FY25,” the brokerage firm said in a company update.

It added: The management is confident of maintaining segmental margin, despite the near-term headwind from a tight supply environment. Moreover, its medium term margin outlook of around 18 per cent EBIT implies a margin expansion.

At 11:03 am, the stock was trading 8 per cent higher at Rs 4,380 on the BSE, as compared to a 0.04 per cent rise in the S&P BSE Sensex. A combined 1.3 million equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.

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