Every week, we recommend a well researched fundamental equity investment as our ‘Pick of the Week’. Handpicked after a thorough analysis of the business, industry and economy, this recommendation has higher potential of earning good returns over a horizon of 6 - 9 months.

INVESTING RATIONALE

Focus on the large deal wins: LTI’s sales strategy focuses on large deal wins, new logo additions to client portfolio, client mining and strategic alliances. LTI has won 19 large deals with 9 new logos in the past 1 year, with combined TCV of large deals at $900 mn. LTI has added three new clients in Q2FY20 with a TCV of $100 mn. Two of these were in Energy and Utilities, while one was in BFSI. Deal pipeline is strong and will continue to add new accounts and large deals. This strategy will help LTI to get long term sustainable business. The management of LTI is confident of strong H2FY20 on ramp-up of deals won earlier.

Digital strategic acquisition for capability building: LTI has recently closed two strategic acquisitions to increase its capabilities. ‘Powerup’ is a cloud consulting company headquartered in Bengaluru, India. The company has expertise in providing end to end services in different cloud platforms like AWS, Microsoft Azure, etc. Powerup was acquired at $15mn and its top line for FY19 was $3.5 mn. LTI also acquired Lymbyc Solutions Pvt Ltd; which is is into AI and machine learning into advanced analytics. This acquisition will help LTI to build its service portfolio in the respective vertical and help in enhancing capabilities.

LTI has a strong core strategy to attain higher growth acceleration: LTI focuses on its core strategy to transform the business breakaway. The company is investing in its core strategy in their client’s success, which will help to increase client retention. This client centric strategy having four pillars viz. operate to transform, data driven organization, experience the transformation and digitizing the core has helped the company to acquire large deal wins in the past few quarters. LTI is also working towards productizing its service offerings, where the focus would be on making services and solutions repeatable at multiple clients.

Focus on digital transformation: The company has a strong focus on digital transformation. Digital business is now contributing 40% to the total revenue. The company has re-skilled ~50% of its talent over the last year in AI cloud computing, safe agile and data visualization. The management plans to create an ecosystem for talent for which it is collaborating with startups and academia.

We recommend a BUY on this stock with a TP of Rs 1,800.

* Note: Stock Investment horizon approx. 6-9 months. CMP as on 13th December, 2019.