IGI Logo

LTTS reported a strong operating performance in 2Q. Revenue grew 2.3% qoq to $317.1mn (2.7% CC), supported by the ramp-up of previously won large deals, strong execution in Sustainability, continued momentum in Mobility, and increasing contribution from AI-led engagements. EBITM expanded by 60bps qoq to 16.3%, above our estimate of 16.0%. Sustainability remains the strongest growth and margin driver in the portfolio. Large deals TCV came in at $203mn, with wins spread across segments and AI-led deals accounting for 50% of the total wins. LTTS reported EI-led revenue for the first time which has reached a quarterly run rate of ~$30mn (~9.5% of revenue). The management expects revenue growth to accelerate in 2H, driven by healthy deal wins and strong pipeline (up >25% yoy), steady demand, and continued strong execution, driving better revenue conversion while sustaining EBITM of 16–17%. Over FY26–31, LTTS aspires to deliver 13–15% revenue CAGR while maintaining EBITM at 16–17%. We raise FY27E EPS by ~11% and FY28E/29E EPS by ~1%, considering the 2Q performance. We retain ADD on LTTS while revising up our TP by ~3% to Rs3,900 from Rs3,800, at 22x Sep-28E EPS.

Results summary

Revenue from continued operations increased 2.3% qoq to $317.1mn (2.7% CC), above our estimate of $314mn (1.6% CC). EBITM expanded by 60bps qoq to 16.3%, above our expectations of 16.0%, largely driven by richer business mix (higher Sustainability and AI revenue), better operational efficiency, improved offshore delivery mix, and margin expansion across all three verticals. Net profit (excl one-time gain from SWC divestment of Rs1.65bn) came in at Rs3.8bn, beating our estimate. Offshore mix grew by 200bps/380bps qoq/yoy to 55.9%. Headcount grew 0.8% qoq to 24,035. The company declared an interim dividend of Rs20/share. What we like: revenue and margin beat, healthy deal wins. What we do not like: weak cash conversion (OCF/EBITDA: ~48%), continued softness in Tech and European auto.

Sustainability continues to lead the growth in 2Q

Sequential revenue growth was led by Sustainability (4.8% qoq) and Mobility (2.3%), partly offset by Tech (-0.7%). Among geographies, India, North America, and Europe saw sequential growth of 3.9%, 2.8%, and 0.6%, while RoW saw flat growth.

Expect broad-based revenue growth with Tech likely to recover from 4Q Sustainability is expected to deliver double-digit growth, supported by a strong project pipeline and increasing AI integration. Mobility is expected to see strong momentum led by a healthy pipeline across geographies and ramp-up of large deals despite persistent weakness in European Auto. Tech growth is expected to be muted in 3Q due to MedTech weakness, with acceleration from 4Q driven by AI-led deal ramp-ups, strength in semiconductors and tech infra, MedTech recovery, and improving Systems & Platforms momentum.

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354