LTTS

Positions for Steady Growth Despite Near-Term Softness

reported a mixed but structurally improving Q3FY26, with revenue softness from seasonal furloughs offset by resilient demand, strong deal momentum, and margin expansion. Revenue stood at $326 million, down 3.2% QoQ but up 4.6% YoY in dollar terms. EBIT margin improved 120 bps QoQ to 14.6%, reflecting portfolio recalibration and discontinuation of select regional offerings. All business segments posted YoY growth, underscoring LTTS’s diversified strength. Segmental Performance - Mobility: Modest uptick despite furloughs; aerospace and rail grew, trucks/highways subdued. Margin steady at 14.8%. - Sustainability: Key growth driver; margin expanded 70 bps QoQ to 28.8%. - Technology: Revenue up 10.5% YoY, margin improved 160 bps QoQ to 10.6%, aided by Intelliswift margin gains and portfolio mix changes. Margin Expansion - EBIT margin rose to 14.6%, driven by discontinuation of select offerings and improved geographical mix. - Sustainability and technology segments contributed meaningfully to margin uplift. Robust Deal Wins - Sustained large deal momentum: average $200 million TCV for five consecutive quarters. - Q3 bookings included a $70m OEM deal, a $30m engagement, a $20m program, and five deals above $10m. - Onsite business increased; offsite share dipped to 54.6%, expected to revert to 56–57%. Demand Environment - Mobility: US recovery driven by software-defined vehicles; Europe shifting to low-cost geographies. - Sustainability: Strong demand for EI (Engineering Intelligence) solutions across energy and industrials. - Technology: AI-led investments validated by client spending; semiconductor, telecom, and medical tech segments showing robust growth. Outlook & Valuation - Guided for mid single-digit growth in FY26. - Medium-term EBIT margin target: 16% by Q4FY27/Q1FY28. - Trades at 25.7x FY27 earnings; recommended as an accumulate on corrections, supported by deal pipeline, AI/EI investments, and margin trajectory.