Below is my attempt to summarize about the company. Please feel free to add risk or comment on growth as you feel.
Description
L&T Technology Services Limited (LTTS) is a global leader in Engineering and R&D (ER&D) services. With 502 patents filed for 53 of the Global Top 100 ER&D spenders, LTTS lives and breathes engineering. Some of the innovation includes – World’s 1st Autonomous Welding Robot, Solar ‘Connectivity’ Drone, and the Smartest Campus in the World, to name a few. Company is present in five main areas – Transportation; Industrial Products; Telecom and Hi-Tech; Medical Devices; and Plant Engineering. Company has 51 innovation labs.
Below is revenue % from each vertical.
Story
L&T TS operates in a niche area as most other IT companies don’t completely focus on engineering.
- Company has a lot of potential to grow if we look at R&D spending of their customers and revenue.
- Company is working on lot of innovative projects
- Company has good ROE/ROCE with zero debt.
- Company can benefit from Covid since small customer might not have budget to invest on innovation lab and can outsource it to the company since LTTS has 50+ innovation lab
Source - Get Rich channel video on LTTS
Financials
Source - screener
Risk
- Budget cut typically happen on R&D spending first. So it might impact company revenue. Need to see if company can retain existing projects and customers for next 1-2 quarters
- Around 50% onsite presence. With H1B and L1 restrictions on travel to US, it might impact their business. But it seems temporary as restrictions will be lifted by year end.
- Any other risk?
Price
Company is available at 16 PE. Since I dont have any knowledge on calculating intrinsic value, so I am not sure if company is providing good margin of safety at current price or not.
Conclusion
Overall I believe customer will keep spending money on automation, smart equipments and LTTS being niche player in this area can benefit and grow in coming years.