L&T Tech IPO opens for subscription tomorrow and has garnered positive recommendations from analysts at several brokerage houses. L&T Tech IPO comes on the heels of poor listing of another L&T group company – L&T Infotech some time ago. However, analysts reckon the public issue is priced competitively. Here is what the brokerage houses have to say about the INR894.4 crore L&T Technology Services (LTTS) IPO:
Angel Broking has come out with its bullish report on L&T Tech IPO since the public offer has been priced competitively to its peers. “We are of view that LTTS stock has the potential to trade at premium to the peers. However, if we consider the average of the 3 peers, then LTTS stock has been priced at 19% discount. Given that the LTTS IPO has been priced at discount, we advise SUBSCRIBE,” said the research house in its report on the IPO.
Analysts at Choice Broking have recommended investors to SUBSCRIBE with Caution while noting that the IPO is s fairly valued. “At the higher price band of Rs. 860, L&T TS’s share is valued at a P/E multiple of 20.1x (to its FY16 EPS), which is in line with the average P/E multiple of 21.4x of its domestic peers. Moreover, its global peers are trading at a P/E multiple of 23.2x,” noted the brokerage house in its IPO note.
In its report on L&T Technology Services IPO, Ajcon Global has put a SUBSCRIBE rating on the IPO. The Mumbai-based brokerage said in its research note, “At the upper end of the price band of Rs. 860, the IPO is valued at a P/E of 21x at Post issue FY16 EPS of Rs. 40.96 which is cheap as compared to its immediate peers. With due consideration to factors like a) underpenetrated corporate ER&D market, b) leading global pure – play ER& D services Company, c) niche business model with very few players in India, d) well diversified player with multi – vertical industry expertise and long standing customer relationships, e) focused on driving innovation through in – house R&D, IP and strategic alliances, f) strong L&T parentage and long history of engineering expertise, g) marquee global clients, h) no Brexit impact as major operations in North America, i) robust ROE of 38.85%, we recommend to SUBSCRIBE the issue for long term.”
In its report on the IPO, Bangalore-based JainMatrix Investments said investors may BUY with a 2 year perspective. “The primary risks are: 1) highly dependent on customers in North America and Europe 2) Forex fluctuation risks 3) Uncertainty around M&A and growth potential. As an investment, the LTTS IPO is rated a medium risk, medium return type of offering,” analysts noted in their recommendation.
On the other hand, ICICI Direct has advised investors to AVOID the IPO citing high valuations. “The stock is available at 15.5x FY18E EPS, which is at a premium to other IT players who has presence in ER&D space such as HCL Tech (12.3x FY18E EPS) and Cyient Technologies (11.9x FY18E EPS). Hence, we believe current valuations leaves limited upside. We recommend that investors AVOID the issue,” the brokerage said in its report.