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LTTS reported Q4FY25 performance below estimates

* Revenue for Q4FY25 came at INR 29.8Bn, up 17.5% YoY and 12.4% QoQ (vs consensus est. at INR 30.3Bn).

* EBIT for Q4FY25 came at INR 3.9Bn, down 8.0% YoY and 6.6% QoQ (vs consensus est. at INR 4.5Bn). EBIT margin was down 367bps YoY and 270bps QoQ to 13.2% (vs consensus est. at 14.8%).

* PAT for Q4FY25 stood at INR 3.1Bn, down 8.7% YoY and 3.5% QoQ (vs consensus est. at INR 3.5Bn).

LTTS achieved record TCV with USD 80Mn+ deal; Double digit USD CC growth expected in FY26E: LTTS delivered robust deal wins in Q4FY25 and FY25, setting a new record for large deal TCV bookings, surpassing Q3FY25. Q4FY25 saw major wins, which included one USD 80Mn+, one USD 50Mn+, one USD 30Mn+, one USD 20Mn+, and three deals above USD 10Mn. Large deal inflows rose over 25% QoQ, many secured against competition, highlighting LTTS’s differentiated offerings and growing market share. The strong performance in Q3 and Q4 has built a solid large deal TCV pipeline. With several USD 100Mn and USD 50Mn deals in advanced negotiation stages, LTTS anticipates continued momentum, expecting Q1FY26 deal wins to mirror prior strong quarters. While FY26 is expected to outperform FY25 with double-digit USD CC growth, we anticipate top-line momentum may be impacted by softness in the Sustainability & Mobility segment, delayed deal ramp-ups, deferrals in deal signings, and cost absorption amid weak macro conditions in the US & Europe. As a result, we expect a soft H1FY25 & project a conservative 7.5% CC growth for FY26E

EBIT margin target of mid-16% by Q4FY27E & ambitious hiring plans: LTTS reported an EBIT margin of 13.2% in Q4FY25, bringing the FY25 margin to 14.9%. The Q4 dip was mainly due to a 150bps impact from Intelliswift consolidation, macroeconomic challenges affecting sustainability and mobility revenues, and strategic customer investment costs. Despite these pressures, LTTS is focused on margin improvement, targeting mid-16% by Q4FY27–Q1FY28, however, we anticipate a conservative margin expansion by FY27E at 15.8%. Headcount rose by 793 to 24,258, driven by the Intelliswift acquisition. LTTS anticipates a strong growth year, planning to hire 2,500 freshers. Wage hike decisions remain pending amid macro uncertainty. Attrition remained range-bound at 14.3%.

View and Valuation: LTTS has gained strong deal momentum, but macroeconomic uncertainty & delayed IT spending decisions may hinder near to mid-term growth. Consequently, we have trimmed our estimates by 4–8%. However, we assign a PE multiple of 30x (earlier 32x), still above other Tier-II ER&D peers, supported by better revenue visibility in favorable environment, healthier return ratios, & better margins. We expect Revenue/ EBIT/ PAT to grow at CAGR of 10.9%/ 14.4%/ 14.3% over FY25-27E. Consequently, we maintain our rating to BUY but lower our target price to INR4,850, based on FY27E EPS of INR 161.6.

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