L&T Technology services 2020 Annual Report Takeaways!

Reading Time: 4 minutes

  • Over the last decade, Transformed from being a traditional engineering service provider to becoming a digital engineering expert service provider with core engineering expertise: 
    • Proven Scaling up skills by now being India’s #1 pure-play ER&D services company.
    • from executing piecemeal projects to winning large multi-million dollar deals.
  • 69 of the Fortune 500 companies are customers.
    • The % of rev from top 5 customers down from 26% to 19%.
  • Sectors with expertise:
  • Transportation (grew by 23%): Automotive, Aerospace, Rail Trucks & Off-Highway
    • OEMs & Tier 1 suppliers are customers.
    •  Steadily transitioning towards autonomous driving, electric cars and sustainable mobility. 
  • Industrial Products: Industrial Machinery, Power Equipment, Lighting Engineering, etc.
  • Telecom and Hi-Tech: Semiconductors, Consumer Electronics, Media & Entertainment, etc.
    • Latest technologies such as 5G, LTE, SDN/ NFV, Multimedia, Connectivity, Cloud, Microservices, DevOps, Big Data/ Analytics, Data Center, OTT, RDK (Video, Broadband, Camera).
  • Medical Devices (grew by 51%): Surgical & diagnostic, Therapeutic & Life Science, Musculoskeletal, etc.
    • Accelerating the development cycle, reducing the time to market by value engineering & multi-geography launch by following country-specific regulatory requirements.
  • Plant Engineering (grew by 26%): Consumer packaged, speciality chemicals, Oil & Gas etc.
    • As an engineering, procurement, and construction management (EPCM) specialist, LTTS supports every phase of a plant’s life cycle from concept to commissioning.
Also Read on FinMedium:  Understanding Cyclical vs Defensive Sectors Strategy
  • Fx risk: Hedged, 85% of international revenue: Majorly from US.
  • LTTS’ share of business from Digital & leading-edge technologies has been steadily rising over the years: 40% of the business.
  • 502 patents ( out of which 352 have been in collaboration with our customers) & 51 Innovation labs- strong focus over IP protected products. Two major focus points:
    • To modernize and refine the product development process through technologies like digital twinning, cloud engineering and plant automation.
    • new/connected products: for end enterprises across exciting new fields like telematics, preventive healthcare and wearables for monitoring. 
  • Financials: Stable revenue growth & cash flows with healthy amount of growth in margins. High ROE business.
  • 16429 employees: Median remuneration: 8.7lakhs, up 2%. (A lot less efficiency compared to global peers even though esops are provided)
    • Incentive structure for the MD & CEO, Dr. Keshab Panda & deputy CEO has sufficient ESOPs. 
    • Overall average managerial pay reduced by 11%.
    • Engineers are the biggest asset, as a lot more investment goes in the training when compared to other IT peers. 
  • Capital expenditure: Rs 135 crs (PY: Rs 87 crs)
  • A bouquet of acquisitions for the year to acquire semiconductor capabilities:
Also Read on FinMedium:  The Union Budget 2020
  • Rs 21 dividend (1.6% yield)
  • Experienced set of board members: (Note: Mr. A.M. Naik is known to be a one man army)
  • 74.62% promoter holding (L&T)
    • 5 out of the top 14 shareholders increased their stake in the company.
  • Macro trends:
    • According to NASSCOM, India’s ER&D services sector is the fastest growing sector within the Indian technology space, 11% YoY worth $33B by FY20.
    • Zinnov reiterates this fact by observing that global ER&D spend is resilient and has witnessed growth despite slowdown and geo-political factors.
    • The global spend of Digital Engineering is expected to grow at a CAGR of 19 percent from $403B in 2019 to $1153B by 2025.
    •  Customers today look for personalization in nearly every product and service, hence customization on a large scale is the key for success.
  • Strong Liquidity position: (Need to be on the lookout for future capital allocation & recovery of receivables)


If you are looking for investment advice, click here and we will reach out to you within 24 hours.

Source link

JST Investments

JST Investments

JST Investments is a Mumbai-based investment firm that believes in long-term wealth creation. It's a brainchild of Aditya Kondawar, Aditya Shah, and Anish Moonka.
Please Share :)