Engineering services firms post strong Q1 performance

Bengaluru: Domestic engineering services companies have posted sound first quarter performance on the back of momentum in the deal space.

Owing to strong demand outlook, L&T Technology Services (LTTS) has raised its revenue growth guidance to 15-17 per cent in FY22 as against the earlier 13-15 per cent. The LTTS has witnessed slowdown in its revenue growth in the last financial year owing to client specific issues and Covid-related disruption. However, analysts expect revenue growth momentum to come back in the current financial year.

"While LTTS has delivered largely flat growth over FY19-21 (one per cent revenue CAGR), due to Covid-19 and ramp down at key clients (partly due to external issues), we expect a strong growth rebound (18 per cent CAGR over FY21-23E)," Motilal Oswal said in a note. The brokerage firm also expects operating margin to improve for the company going ahead.

On the deal space, LTTS has won 11 deals, out of which six were over $10 million and two were $25 million. Another engineering services company Cyient, though witnessed a dip in revenues in the first quarter in services segment, is likely to pick up momentum and is expected to post double digit growth in this segment.

"Outlook for Q2 and the rest of the year remains strong due to the order intake and backlog in various verticals. We continue to hold our outlook for FY22 and expect double-digit growth in services business for the year," MD and CEO of Cyient, Krishna Bodanapu has said.