L&T Technology stock surges 4% on strong FY25 growth outlook

At its recently held analyst day, the company's management said it aims to achieve FY25 revenue of $1.5 billion, along with 18% Ebit margin. Ebit is short for earnings before interest and tax.

The company's management hopes to benefit from increased digitization which is driving accelerated spends in ER&D (engineering and research and development). According to the management, the sector's overall ER&D spending is likely to improve from $1.4 trillion in calendar year 2020 to $1.7-1.9 trillion by calendar year 2023.

Also, L&T Technology has increased its focus on scaling up large accounts along with large deals, which will drive growth. The management sees scope for margin improvement, led by a further offshore shift.

Further, the management highlighted six large areas of corporate investment, where it sees significant growth opportunities. These comprise electric, autonomous and connected vehicles, medtech, 5G, artificial intelligence and digital products, digital manufacturing, and sustainability.

Analysts at Motilal Oswal Financial Services Ltd said, the company's FY25 guidance implies a FY21-25 US dollar revenue CAGR of around 20%, and indicates high management confidence in both the demand environment as well as its ability to gain share in all key verticals.

"Moreover, it reiterated its focus of keeping its guidance achievable, despite client and attrition related risks. We see this as an indication that there can also be potential upside risk to its aspiration of USD1.5 billion revenue by FY25," said the Motilal Oswal report.

The domestic brokerage house expects L&T Technology to deliver strong revenue growth over the coming years.