L&T Rating: Buy — A modest showing in the final quarter

L&T Technology Services (LTTS) reported USD revenue decline of 2% q-o-q in Q4FY20. Ebitda margin came in at ~ 19.8% (ex-one-off), in line with our estimate. Revenue contraction is attributable to a 9% q-o-q dip in Plant Engineering (PE), overwhelming the robust 7% q-o-q growth in the medical devices business. Industrial products and Telecom & Hi-Tech were marginally down q-o-q.

Management refrained from guiding for FY21, but mentioned they expect revenue to slide in Q1FY21 and the recovery to take place thereafter. While we remain bullish on the long-term prospects of the fast-growing ER&D and believe LTTS is in a pole position to benefit thereof, the near-term pain from COVID-19 forces our hand to cut LTTS’s EPS by 15% each for FY21e and FY22e.