L&T Infotech zooms 16.5 per cent on earnings report. Know why?

A major bull rally is being witnessed by the stock on earnings release, with improved attrition rate, double-digit YoY growth in sales and net income have made investors buy the stock.

IT stocks are rallying in the past few weeks, and L&T Infotech is leading the pack with an exceptional earnings report. A major bull rally is being witnessed by the stock on earnings release, with an improved attrition rate, double-digit YoY growth in sales and net income have made investors buy the stock.

Net sales in Q2 FY22 increased by 8.8 per cent QoQ and 25.6 per cent YoY to Rs.3,767 crore against Rs 2,998 crore in the previous year same quarter. EBIT increased by 14.1 per cent QoQ and 8.8 per cent YoY to Rs 648 crore against Rs 595 crore in the previous year same quarter.

Net profit of L&T Infotech increased by 11.1 per cent QoQ and 20.8 per cent YoY to Rs.551 crore against Rs.457 crore in the previous year same quarter. EBIT margin is at 17.2 per cent with a YoY decrease of 270 bps. PAT margin is at 14.6 per cent with a YoY decrease of 60 bps.

The decrease in EBIT margin is due to an increase in employee benefits expense which was 59.3 per cent to net sales which has increased to 60.9 per cent of total sales. 

The company has given guidance of generating net sales of Rs 15,000 crore in FY22, which will be YoY growth of 21 per cent against last year. The company have declared an interim dividend of Rs 15 per equity share. Company has managed to improve the attrition rate, decrease of 4.7 per cent QoQ.

Deals won by L&T Infotech in the quarter:

1) The company engaged with one of India’s leading private sector banks to create a data platform on cloud spanning all core and foundational  functions of the bank such as Retail, NRI, Wealth, Corporate, Risk, Finance, Operations and HR. 

2) Selected by a global bank for solving regulatory reporting issues and improving business operations efficiency through process automation.

Key growth drivers: 

1) Large deal pipeline in BFS and insurance sector where banks are moving digital in a rapid manner. 

2) Cyber security is an area of big growth where the company has 10-15 per cent of sales from this service. 

At the end of trading session, the stock is up by 16.5 per cent to Rs. 6,900 on NSE.

What else do you think might be the reason for the solid spike?