The stock of L&T Technology Services (LTTS), the Engineering and R&D services arm of infrastructure giant Larsen and Toubro, is going through a bad time as 2023, which was expected to bring some relief after an unfavourable 2022, has been off to a bad start. The stock has declined 12.5% in the first 3 weeks of 2023!!

2022 was expected to be a good year for the stock. It had been in an uptrend since July 2021 and the momentum was expected to continue in 2022, but 2022 spelled disaster for the scrip. The stock began declining soon after 2022 began. It tanked 6.3% in a single day when it announced its Q3FY22 results wherein the company’s results missed the mark.

It lost 22% in a week’s time as buying picked up once again. However, the same couldn’t sustain as the stock was range bound for the next 2 months. During February and March 2022, neither bulls nor bears could assist the stock breach through the range of Rs 5066.30 and Rs 4289.05.

But when there was a general weakness in the markets and the Nifty IT began declining in early April 2022, the stock breached its support at Rs 4289.05 and fell below the range. The stock was in freefall as it lost 43% in 3 months!! Weakness in the stock persisted till early July as it was a bad time for IT stocks altogether: TCS lost 15.7%, Wipro fell 32% & Infosys fell 21.7% during the same time period.

From July 2022, the stock gained some traction as bulls took charge of the stock once again after the stock hit a 52-week low of Rs 2908.20. The stock broke through three resistance levels in less than two months and gained 34.4% before it became range bound once again. On 1st December 2022, the stock listed its greatest intraday gains in 2022 when it grew 9% in a single day followed by a further 3% growth the next day due to positive interest in the battered Indian IT sector.

LTTS’s daily transaction volumes surpassed 1 million on those days against the daily average of 150k! 

 

But that was the end of the bullish spurt as the stock declined once again. This time the decline was especially bad as the stock lost 14% in December 2022. January 2023 was unforgiving as the investor lost faith in the stock. The announcement of Smart World & Communication (SWC) sent the share down as it witnessed a gap-down opening and fell 5%.

The company recently published its Q3FY23 results wherein the company reported a 22% YoY growth in net profits! However, some analysts felt that the QoQ performance of the company was not up to their estimates, which resulted in the stock falling 4%, through an important support point and closing at Rs 3230.70 on Friday, a price level the stock hadn’t touched since August 2022.

What is the future outlook of LTTS?

Fundamentally, the stock’s recent results reported robust growth. Its profits grew 22% YoY to Rs 303.6 crores as revenues jumped 21% YoY to Rs 2048.6 crores as the EBIT margin of the company was 18.7%, higher than the analysts’ estimates of 18.3%. In addition to that, the company opened a new centre in Toronto and expanded its operations in Peoria which would offer digital manufacturing and next-gen electrification solutions.

Moreover, the company also acquired Smart World and Communications (SWC), which is set to be a major boost to the company’s next-gen communications, sustainable spaces and cybersecurity. This acquisition is a part of the company’s 6 Big Bets strategy which is expected to open new avenues for growth. Furthermore, the company has projected annual revenues of $2 billion by FY26 following the acquisition of SWC.

 

Technically, the stock recently breached through its support point at Rs 3322.60, a level which the stock had tested multiple times but always faced rejection from the same. Upon breaching this support level, the stock is close to its second support level at Rs 3211.40 as it is trading below its 5,20,50,100 and 200 day moving averages.

The RSI of the stock is currently around 21, meaning the stock is dangerously close to its oversold level, meaning that the stock is currently available for a cheap price and presents a buying opportunity. Therefore, the stock should see buying pressure pick up in the coming week.