L&T Technology Services Wins $50 Million Avionics Contract

L&T Technology Services Ltd (LTTS) has announced that it has won a landmark project worth $50 million spanning over five years from a leading aerospace electronic systems manufacturer. The company added that LTTS has emerged as the winner to be the strategic supplier for the client’s Engineering and R&D (ER&D) pursuits.

Further to the announcement, the company stated aerospace customers are looking for an end to end engineering partners for their new age aviation initiatives and the project with LTTS will result in a transformation of their operations into a managed services model. This model will encapsulate support to both existing products and also for work related to next generation in-flight system.

LTTS is a well-established and only pure-play company in ER&D space in India and can benefit from the favorable outlook for the ER&D space which is expected to grow at a faster clip than the traditional IT space. The company’s order backlog stood at USD220mn as on 2QFY18. The transportation (aerospace) vertical is the largest contributor and accounted for ~32% of LTTS’s revenue as on 2QFY18. We believe that such large deal wins the transportation vertical will continue to drive revenue growth for the company. At the current market the stock is trading at ~17x its FY20E EPS v/s Cyient which is trading at ~12.5x its FY20E EPS. However, LTTS has 100% of its revenue from the better place ER&D space v/s Cyient which derives 65% of its revenue from ER&D and LTTS has superior ROE profile v/s latter (~23% v/s ~17%).

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