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LTTS has reported Q1FY25 revenues at $295.2mn, down 3.1% QoQ and up 6.1% YoY in CC terms as guided last quarter and due to SWC seasonality. In USD terms, it was down 3.3% QoQ and up 5.4% YoY whereas in INR terms, revenue came at INR24,619mn, down 3.0% QoQ and up 7.0% YoY. During the quarter, LTTS won two USD30mn deals, two USD15mn deals and three deals with TCV of USD10mn. PAT for the quarter came at INR3,136mn, up 0.8% YoY with EPS at INR29.6.

* Mobility grew 6% sequentially and is now a USD400mn+ annual business on a run-rate basis. The strong growth was driven by differentiated presence across EV, SDV and connected car technology. While EV opportunities continue, the spends are shifting to SDVs. Company is accelerating its SDX competencies and building a proprietary framework. In Commercial Vehicles, EV continues to be a strong growth area, while in Aerospace, it is seeing large deal opportunities in avionic equipment development. Management expects the growth momentum in Mobility to continue in the coming quarters. In Hi-tech and Sustainability, new strategy is driving a significant increase in pipeline and large deal discussions gives confidence of a pickup in growth momentum going ahead. Under Sustainability, there is strong growth in the sub-segment plant engineering, led by new Capex projects, spend on plant modernization and digital twins. Company is investing in asset management solutions, in variable speed motors, in drives and controls which is believed to be the next engine of growth for Industrials. Sustainability has bottomed out and shall start picking up growth Q2 onwards. Company sees multiple large deals in play across Telecom, Semicon, ISV, and Medtech which gives confidence of growth for hi-tech rebounding from Q2 onwards.

* LTTS is accelerating investments and innovation focus leading to total of 61 patents being filed across segments in transportation, medical and industrial products. It has collaborated with NVIDIA in medical, AWS for transportation, and Google for multiple segments. Company has started to win AI led deals on the back of solutions in GenAI across Asset Health, software development and digital assistants. In order to prioritize growth, it has made investments in sales and technology under its ‘Go Deeper to Scale’ strategy.

* Operating (EBIT) margins for the quarter came at 15.6%, down 129bps QoQ and 160bps YoY impacted by revenue seasonality and investments in each segment to accelerate growth. Management identifies margin expansion levers like quality of revenue, off-shoring and pyramid optimization. Margin trajectory in H2 is to be better than H1 and the company has guided for 16% margins for FY25E.

Valuation: With phase one of reorganization and related investments in technology and leadership complete, company reaffirms its aspirations to reach $1.5bn in annualized revenues by FY25E. Company guides for a 8-10% cc growth (organic) for FY25E under the new strategic reorganization. We upgrade our rating to BUY with a revised target price of INR5,380 implying a PE of 33x on FY26E EPS of INR163.

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