Why Has Prabhudas Lilladher Kept a Hold on L&T Technology Services With a Target of ₹4,070?
About L&T Technology Services
🔹 Larsen & Toubro Technology Services (LTTS) is a leading engineering and R&D services company focused on ER&D, digital engineering, and embedded systems.
🔹 The company derives revenues from transportation, industrial products, medical devices, and telecom & hi-tech verticals.
🔹 LTTS is considered a niche play within the IT services space with higher exposure to engineering-led transformation.
Brokerage Prabhudas Lilladher has reiterated a Hold rating on L&T Technology Services while revising its earnings estimates and maintaining a target price of ₹4,070. The stance reflects a balance between steady long-term prospects and near-term growth moderation.
Revised Growth Outlook
🔹 FY26E constant currency revenue growth estimated at 5.0%.
🔹 FY27E growth moderated to 3.5%.
🔹 FY28E growth expected to improve to 9.0%.
The brokerage expects growth to remain measured over the next two years before accelerating in FY28. This trajectory suggests a prolonged digestion phase in client spending followed by a pickup as engineering budgets normalize.
Margin Trajectory
🔹 FY26E operating margin projected at 13.9%.
🔹 FY27E margin expected to expand to 15.2%.
🔹 FY28E margin seen improving further to 15.7%.
Margin expansion is expected to be driven by operating leverage, improved utilization, and a richer mix of digital engineering projects. However, near-term pressures from wage hikes and pricing discipline remain key monitorables.
For market participants tracking IT and engineering stocks through derivatives, Nifty Tip and BankNifty Tip are commonly used to align positions with broader index trends.
EPS Revision and Valuation
🔹 FY27E and FY28E EPS estimates revised downward by ~7%.
🔹 Target price of ₹4,070 is based on 25× FY28E EPS.
🔹 Valuation reflects moderated growth visibility in the medium term.
The downward EPS revision reflects cautious client spending and slower-than-expected ramp-ups in certain verticals. Despite this, Prabhudas Lilladher believes the current valuation adequately captures both risks and long-term potential.
Why the Rating Is Hold
🔹 Near-term growth visibility remains moderate.
🔹 Margin expansion is gradual, not immediate.
🔹 Valuations are fair relative to growth outlook.
A Hold rating typically suggests limited upside in the near term but no major downside risks either. For LTTS, the brokerage sees stability rather than aggressive re-rating until growth acceleration becomes more visible.
Key Risks to Watch
🔹 Prolonged slowdown in global engineering R&D spending.
🔹 Delays in client decision-making.
🔹 Margin pressure from talent costs and pricing.
Investor Takeaway: Derivative Pro & Nifty Expert Gulshan Khera, CFP®, notes that L&T Technology Services remains a structurally strong ER&D player, but near-term growth moderation and EPS downgrades justify a cautious stance. Investors may prefer to wait for clearer signs of demand recovery before expecting meaningful upside. For disciplined market insights and sector analysis, explore Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
Related Queries on LTTS and ER&D Stocks
🔹 Why is LTTS growth expected to be slower in FY27?
🔹 How important is margin expansion for ER&D companies?
🔹 Are engineering services stocks defensive or cyclical?
🔹 How should investors interpret Hold ratings?
🔹 What triggers re-rating in IT and ER&D stocks?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
