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Lakshya 2031: Ambitious targets, execution key

We attended LTM’s Investor Day 2026, where discussions were centered on Business AI, platform-led services, AI monetization and the recently announced Randstad acquisition. Management outlined its Lakshya 2031 aspiration of ~2x revenue and ~200bp EBIT margin expansion over FY26-31, implying a revenue CAGR of ~15%. The target includes both organic and inorganic growth, with acquisitions expected to contribute ~15-17% of incremental revenue. A key pillar of the strategy is the company's focus on Business AI and domain-specific small language models (SLMs), which we believe can help move AI adoption beyond productivity use cases and closer to business workflows and decisionmaking. While the ambition is notable, achieving a sustained mid-teen growth trajectory will require successful AI monetization, effective integration of acquisitions, continued large-deal momentum, and a supportive demand environment. We believe the aspiration remains ahead of LTM's recent growth profile, with the path to delivery still dependent on several variables that are yet to fully play out. On margins, management continues to target ~200bp expansion by FY31; however, we believe industry-wide pricing pressure and competitive intensity could keep near-term improvement gradual, with margins likely to expand 50bp over the next couple of years and further upside dependent on successful AI monetization and a higher mix of platform-led revenue. We value the company at 23x FY28E EPS, implying a TP of INR5,400 and ~25% upside. Reiterate BUY.

Lakshya 2031: Ambitious growth aspiration; execution remains the key monitorable

* Management outlined its Lakshya 2031 ambition of ~2x revenue and ~200bp EBIT margin expansion over FY26-31, implying a revenue CAGR of ~15% (see exhibit 3). The framework is built around three pillars – scaling its core verticals (BFSI and Technology), monetizing Business AI opportunities, and expanding wallet share through large deals and strategic acquisitions.

* A key element of the strategy is management's belief that AI expands, rather than compresses, the addressable market (see exhibit 1). While traditional IT services could see ~USD300b of spend compression through platformization and productivity gains, management expects this to be more than offset by opportunities in platformized IT services (~USD500b) and AI-led engineering and Business AI (~USD800b).

* The company has reorganized its portfolio into three AI-led businesses – iRun, iTransform and Business AI, with BlueVerse serving as the common AI platform across service lines.

* That said, the aspiration (implying 15% CAGR for FY26-31) remains significantly ahead of the company's recent growth trajectory. Management clarified that the target includes both organic and inorganic growth, with acquisitions expected to contribute ~15-17% of incremental growth.

* In our view, execution around AI monetization, successful integration of acquisitions and sustained large-deal momentum will determine whether LTM can move to a structurally higher growth trajectory over the next five years. The ambition is notable, but the path to delivery remains less defined at this stage.

Business AI and SLMs could emerge as the next leg of growth

* A key part of LTM's strategy is its focus on Business AI and domain-specific SLMs. Rather than building foundation models, the company focuses on creating client-specific AI solutions using enterprise data, code, processes and domain knowledge.

* Management highlighted use cases across treasury platforms, Customer360, loyalty management, insurance and industrial AI. The common thread is moving beyond technology implementation and b ecoming more embedded in business workflows and decision-making.

* LTM also introduced BlueVerse Currency, a commercial framework that supports pricing based on agents, outcomes, subscriptions and transactions, alongside traditional effort-based models. The objective is to gradually improve revenue productivity and reduce dependence on headcount-led growth.

* We think this is the direction in which the industry is moving. However, Business AI monetization is still at an early stage and revenue disclosure remains limited. Management indicated that more visibility on AI-for-Business revenue could emerge over the coming quarters.

* Over the medium term, management expects revenue growth to outpace headcount growth, supported by AI-led productivity gains and platform-based offerings. a doubling of revenue may only require ~1.4x growth in headcount, implying higher revenue productivity and greater non-linearity over time.

Margin outlook: near-term expansion likely gradual

* Management reiterated its aspiration of ~200bp EBIT margin expansion by FY31, driven by Business AI revenue, outcome-based pricing, platform-led monetization, and AI-driven productivity gains. However, higher go-to-market investments could partly offset these benefits, with SG&A expected to rise to 11-11.5% of revenue from ~10.5% currently.

* BlueVerse, domain-specific SLMs, and emerging AI-led commercial models are intended to improve revenue productivity and gradually decouple revenue growth from headcount growth.

* The proposed Randstad acquisition is not expected to create meaningful margin dilution in FY27. While management sees opportunities from offshore leverage, MSP savings, and revenue synergies, we expect margin expansion to remain gradual over the next few years.

* We believe industry-wide pricing pressure and competitive intensity are likely to limit near-term upside, although the bulk of productivity pass-throughs for large accounts may already be behind. As a result, margins could expand by ~50bp over the next couple of years, with further upside contingent on successful AI monetization.

* Overall, we believe margin expansion is likely to come more from a change in revenue mix toward Business AI, platform-led services and outcome-based engagements rather than traditional utilization or pyramid levers alone.

Valuation and view

* We believe LTM’s estimated EPS CAGR of 14% for the next two years remains meaningfully better than that of large-caps. Productivity pain for key accounts is behind, which could be positive vs. peers in the next couple of years. While growth acceleration remains measured at ~7-8% over FY27-FY28 and the recovery in the top BFSI account is likely to be gradual, strong deal wins and a robust pipeline provide visibility.

* We are also seeing early signs of a different template emerging – platform-led, AI-native players (for example, efforts like OpenAI’s DeployCo or similar structures from Anthropic). We would watch for vendors who can move in that direction.

* We think this is a phase where acquisitions need to be more capability-led, especially around AI, rather than just geography or accounts. The next 12-18 months could see more M&A focused on building such capabilities. We value the company at 23x FY28E EPS, implying a TP of INR5,400 and ~25% upside. Reiterate BUY.

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