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* LTTS is an engineering R&D (ER&D) services provider. It offers consultancy, design, development and testing services across the product development life cycle. It primarily operates in three segments: i) Mobility (automotive, commercial vehicles, aerospace), ii) Sustainability (Tech, FMCG, Oil and Gas), and iii) Hi-Tech (Semi-conductors, consumer electronics).

* Company delivered 3.4% QoQ CC revenue growth in Q2FY25 backed by robust growth across its verticals. In H1FY25, it has grown by 6% over H1FY24. Higher SG&A costs kept the EBIT margins under pressure at 15.3% in first half of the year. Company aspires to close at ~16% for FY25 which is achievable since Co is done with investments and would leverage operational efficiencies in H2FY25.

* LTTS has maintained its FY25 growth guidance of 8-10% in CC terms despite a subdued Q1 quarter where revenues de-grew by 3.1% QoQ. Company has to now deliver a growth of 4.5%-7% QoQ in the next two quarters to meet its yearly guidance. This is backed by the increased demand for digitization in the ER&D space and LTS has a strong presence across verticals.

* LTTS has been adding good number of clients every quarter. In the recent quarter, Co added 2 deals of $20 mn and 4 deals of $ 10mn each taking the total number of active clients to 373.

* Earlier in March 2024, Company had won $100 mn cybersecurity project from Maharashtra government. Milestone payments of this project are also expected in Q3 and Q4. Co is also looking for inorganic opportunities in Automotive, Hyperscallers and Healthcare sectors and further enhance its gamut of offerings. As of Sep 2024, the company held net cash of Rs.1114 crore.

* We expect LTTS to report strong numbers in the coming quarters on the back of increased traction in the ER&D space and overall demand recovery in certain verticals. Stock is available at P/E of 32x FY26E expected earnings and we recommend BUY on the stock.

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