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L&T Technology reported mixed performance for the quarter. While, revenue was inline; EBIT margin was below expectation. It reported revenue of Rs 25.7bn, up 4.5% QoQ in INR terms, up 3.9% QoQ in USD terms. Segment-wise, Mobility grew by 4.8% QoQ, Sustainability grew by 6.5% QoQ; while Tech vertical grew by 0.8% QoQ. EBIT margin declined by 51 bps QoQ to 15.1%, led by higher other expenses (up 8.4% QoQ). During the quarter, it won two $20mn and four $10mn TCV deals. Headcount increased by 121 QoQ to 23,698 employees. Attrition was down 50 bps QoQ to 14.3%. It has set medium term plan of $2bn revenue and EBIT margin of 17-18%. It maintained 8-10% revenue growth guidance for FY25 along with improving operating margin for H2FY25. The near term demand environment remains challenging especially in mobility/automotive segment as discretionary tech spending remains weak. EBIT margin remains under pressure on account of investments required to drive growth. We expect Revenue/EBITDA/PAT to grow at 13.2%/14.8%/15.1% over FY24-FY27E. We have revised our FY25E/FY26/FY27E EPS by (0.7%)/(1.6%)/NA. We rollover to Sep’2026 for valuation and maintain our REDUCE rating on the stock with revised target price of Rs 5,115 (vs Rs 4,807 earlier) at PE of 29x(unchanged) on Sep’2026 EPS.

Revenue for the quarter was inline with expectation

Revenue grew by 4.5% QoQ in INR terms, up 3.9% QoQ in USD terms. Segment-wise, Mobility grew by 4.8% QoQ, Sustainability grew by 6.5% QoQ; while Tech vertical grew by 0.8% QoQ. The near term demand environment remains challenging especially in mobility/automotive segment as discretionary tech spending remains weak but there are certain green shoots in demand environment. It maintained revenue growth guidance of 8% to 10% in cc terms for FY25 and outlined its aim to achieve $2bn revenue company in medium term

Sequential dip in operating margin

EBIT margin declined by 51 bps QoQ to 15.1%, led by higher other expenses (up 8.4% QoQ). It has maintained its EBIT margin guidance to around 16% for FY25. Wage hike with effect from Nov’2024 would affect Q3FY25 operating margin. It continues to work on margin levers that include improving employee pyramid, improving revenue mix, higher offshoring and other efficiency measures to support operating margin.

Maintain REDUCE rating on the stock with target price of Rs 5,115/share

The near term demand environment remains challenging with clients taking longer time for decision making. The demand environment in mobility/automotive segment remains muted as discretionary tech spending remains weak. However, there are certain green shoots in demand environment. It has maintained 8-10% revenue growth guidance for FY25 with expected pickup in H2FY25. We expect gradual improvement in EBIT margin in H2FY25. We expect Revenue/EBITDA/PAT to grow at 13.2%/14.8%/15.1% over FY24- FY27E. We have revised our FY25E/FY26/FY27E EPS by (0.7%)/(1.6%)/NA. We rollover to Sep’2026 for valuation and maintain our REDUCE rating on the stock with revised target price of Rs 5,115 (vs Rs 4,807 earlier) at PE of 29x(unchanged) on Sep’2026 EPS.

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