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Steady quarter

LTIMindtree (LTIM IN) reported slightly better revenue in Q3, while margins were in line with our estimates. LTIM’s revenue growth momentum is likely to continue into Q4 on account of strong deal wins. The company continues to benefit from vendor consolidation opportunities as it consolidates the long tail in some of its large customer accounts. Growth in its top-two accounts has been muted in the past 2-3 quarters (revenue mix is 18-19% now vs 21-22% earlier), given negotiations regarding productivity gain pass on. As per LTIM, these accounts are likely to bottom out in Q4, and growth may accelerate in FY27. In BFSI, LTIM’s positioning has been elevated from a preferred system integrator not only at its largest BFSI account but across top five accounts, top seven global banks. Margins may be impacted in Q4FY26 and Q1FY27 due to wage hikes, but LTIM has enough levers to mitigate this and continue on its margin expansion journey. Reiterate Accumulate with a higher TP of INR 6,740.

Growth led by Healthcare, Manufacturing and Consumer verticals: LTIM’s reported revenue grew 2.4% QoQ and 5.2% YoY in CC. USD revenue increased by +2.4% QoQ/+6.1% YoY, but INR revenue growth was higher at +3.7% QoQ/+11.6% YoY due to INR depreciation in Q3. Broadbased growth was seen across geographies, with growth led by RoW at +14.1% QoQ/+14.4% YoY, followed by North America and Europe growing 0.4% and 3.4% QoQ, respectively, in USD terms. Vertical-wise, Healthcare and Manufacturing led growth in Q3 (up 9.9% QoQ/9.4% QoQ respectively), followed by Consumer growing 1.2% sequentially in USD terms. Hi-Tech was flat, while BFSI declined by 0.7% QoQ in Q3FY26. TCV was healthy at USD 1.69bn in Q3, up 6.3% QoQ/0.6% YoY; including a USD 155mn five-year large deal in BFSI.

Margin expansion led by Fit4Future program: EBIT margin rose 20bps sequentially to 16.1%, led by benefits from cost optimization from ‘Fit4Future’ program and currency tailwinds, though partially offset by seasonal furloughs and lower working days. LTIM also on-boarded 1.7K freshers in Q3 to support its pyramid correction program. Utilization normalized to 86.9% due to fresher hiring, while attrition declined 40bps to 13.8%. Wage hikes will commence in Q4, covering ~50% of the employees initially, while rest of the employees will be covered in Q1FY27. While wage hikes will create near-term headwinds, management expects to close FY26 EBIT margin higher than FY25 through operational efficiencies.

Retain Accumulate with a higher TP of INR 6,740: LTIM continues to increase its wallet share at some of its largest customers by consolidating tail vendors. It also ruled out the risk of being replaced by another large vendor at any of its accounts, which is comforting. Performance revival in its top 5/10 accounts is the key here, which will likely help accelerate growth in FY27. Deal momentum has picked up, which will provide near-term visibility. We raise our earnings estimates by ~3%/6% for FY27E/28E to factor in continued growth momentum and margin expansion. So, we raise our TP to INR 6,740 from INR 6,320, based on 31x (earlier at 30x) FY27E P/E on better performance, going ahead. Key risks to our estimates are lower-than expected revenue growth and margin expansion.

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