Shares of L&T Technology Services jumped nearly 9 percent in Thursday's intraday trade after the multinational technology company posted 18 percent year-on-year jump in its net profit at Rs 309.6 crore for the March quarter.

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The stock was trading 8.51 percent higher at Rs 3,740.20 per share during noon deals. It has surged 10.02 percent in the last one week and 12 percent in the last one month. LTTS shares have touched a 52-week high of Rs 4,316.75 apiece and Rs 52-week low of Rs 2,923.35 apiece.

Analysts at domestic brokerage HDFC Securities believe the company's near-term upside potential is limited. The brokerage has maintained a 'Add' rating on the stock with a target price of Rs 3,585 based on 25 times Dec-24E EPS (in line with average multiple) and supported by 17 percent EPS CAGR over FY23-25E.

LTTS has an average broker target of Rs 3,793, implying an upside potential of 2.68 percent.

LTTS Q4 performance

LTTS has delivered nearly an in-line performance in the fourth quarter but modest revenue guidance for FY24E (over 10 percent organic), following 15.8 percent growth in FY23.

Total revenue stood at Rs 2,096.2 crore during the period under review, up 19 percent against Rs 1,756.1 crore in the corresponding period of the preceding fiscal. CNBC-TV18 Polls had predicted revenue of Rs 2,088 crore for the quarter under review.

The company's earnings before interest and tax (EBIT) increased 2.6 percent quarter-on-quarter to Rs 392.7 crore from Rs 382.9 crore. The EBIT margin stood was flat at 18.7 percent in the March quarter.

"From the peak EBITM of 18.5 percent in FY23, margins will moderate to 17 percent and 17.5 percent in FY24/25E due to the consolidation of SWC acquisition and business mix (higher growth in the transportation vertical ahead, supported by recent large wins)," analysts said.

LTTS maintained its medium-term growth outlook ($1.5 billion revenue rate by FY25E). Near-term margin headwinds of SWC consolidation (in Q1FY24E -180 basis points QoQ impact) and wage increase (in Q2) will be offset by medium-term levers of higher offshoring (60 percent targeted) and better revenue profile of SWC post integration with a focus on services revenue.

FCF generation in FY23 improved to 97 percent (FCF/PAT), from 88 percent in FY22, but cash generation will be impacted in FY24E as LTTS integrates SWC. We have built low-teens organic revenue CAGR over FY23-25E, which is higher than its historical 12 percent CAGR (~300bps above tier-1 IT), supported by a strong and diversified engineering services pedigree.