🧠 At a Glance
L&T Tech Services is not your typical IT stock. It does niche engineering, R&D, and tech consulting for giants in MedTech, Aerospace, Hi-Tech, and Industrial Products. It’s not cheap, but boasts a 22% ROE, 28% ROCE, and has a stronger ESG rating than half of Indian mutual funds.
🚀 1. Business Model Breakdown
- 🧪 What they do: Think TCS for Machines.
- Embedded systems, automotive software, medical device tech, chip design, smart factory solutions.
- 🌍 Global reach: 296 clients across 25+ countries.
- 🧠 Fortune 500 clients: 69. Yes, the top of the pyramid.
- ⚡ Tech Exposure: Growing revenues from hyperscalers and semiconductors — right where the world is spending.
💸 2. 5-Year Financial Recap: Patent Pending Profits?
| Metric | FY21 | FY25 | % Change |
|---|---|---|---|
| Revenue | ₹5,450 Cr | ₹10,670 Cr | 🔼 96% |
| Net Profit | ₹666 Cr | ₹1,264 Cr | 🔼 90% |
| OPM | 18% | 18% | ➖ Flat |
| ROE | 25% | 22% | 🔻 Slight dip |
| EPS | ₹63.1 | ₹119.6 | 🔼 89% |
| Dividend Payout | 35% | 46% | 🟢 Generous |
👉 3Y CAGR:
- Sales: 18%
- Profit: 10%
- Stock: 13%
Margins haven’t expanded, but scale has delivered.
🧮 3. Fair Value (FV) — Code Running Ahead of Earnings?
Valuation Check
- FY25 EPS = ₹119.6
- P/E Range (historical): 28x – 36x
- Current P/E = 36.6x
- High ROCE/ROE justifies modest premium… but not a moonshot.
📊 FV Range = ₹119.6 × (30x to 35x) = ₹3,588 – ₹4,186
📍 CMP: ₹4,360 = Slightly Overvalued, unless FY26 earnings jump again.
🧪 4. Quarterly Trends: Any Red Flags?
| Quarter | Sales (₹ Cr) | Net Profit (₹ Cr) | OPM % |
|---|---|---|---|
| Mar 2024 | ₹2,538 | ₹341 | 20% |
| Mar 2025 | ₹2,982 | ₹310 | 16% ❗ |
📉 Profit fell YoY despite 17.5% revenue growth.
⚠️ OPM compressed to 16% – worst in 3 years.
🧠 Possibly due to salary hikes, onshore cost pressure, or lagging billing rates.
👨⚖️ 5. Peer Check: Who’s the Coolest Tech Nerd?
| Company | P/E | ROE % | OPM % | Profit (₹ Cr) |
|---|---|---|---|---|
| LTTS | 36.6 | 22.1 | 18% | 1,264 |
| Tata Tech | 41.9 | 19.9 | 18% | 677 |
| Inventurus | 56.4 | 32.9 | 29% | 486 |
| Affle 3i | 71.3 | 14.0 | 21% | 382 |
| Cyient | 23.3 | 12.9 | 15% | 616 |
📢 LTTS = Best quality play but priced near the top of its comfort zone.
Tata Tech? Growing faster but smaller base.
Inventurus? High margin, private equity-ish bubble stock.
🧾 6. Balance Sheet & Cash Flow Highlights
- 💰 Reserves: ₹6,059 Cr
- 🏦 Debt: Minimal (₹578 Cr only)
- 💵 Cash from Ops: ₹1,481 Cr (FY25)
- 🛠️ CWIP: Minimal – asset light, service-heavy
- 📉 Net cash flow still positive despite high dividends
✅ Dividend Yield: 1.26%
✅ Book Value per share: ₹574
⚠️ CMP/BV = 7.59x → Expensive on BV metric
🎯 7. EduInvesting Verdict
L&T Tech Services is what Infosys wishes it could be if it only hired IIT Madras grads with soldering irons.
It has the metrics — ROE, dividend, client base — but…
- ⚠️ Margins are slipping
- 📉 Profit growth is decelerating
- 🔺 Valuation is fully priced in
Unless there’s a big rebound in ER&D spending globally (especially in MedTech + EV space), you’re paying ahead for average visibility.
🟢 FV Range: ₹3,588 – ₹4,186
📍 CMP: ₹4,360 → Trading above upper band, not ideal entry.
🧠 Better than 90% of tech stocks — but don’t get FOMO’ed at the top.
✍️ Written by Prashant | 📅 26 June 2025
Tags: LTTS, L&T Technology, engineering services, ER&D India, tech multibagger, fair value LTTS, Tata Tech vs LTTS, software stock India
