LTIMindtree (LTIM IN) – Q2FY26 Result Update – Margin expansion strong in Q2, AI transition drag in top accounts … – HOLD

The revenue growth (+2.4% QoQ CC) was above our estimates (1.9% QoQ CC), aided by ramp up of large deal within Retail segment. Beyond selective pockets the growth was muted, especially BFSI and CMT verticals. Although the deal signing activities remain strong in these verticals, the scope of new work gets compromised against productivity benefits, which usually get passed on to marquee accounts. The management was claiming the impact is more transitional in nature and industry-oriented, which is expected to recoup against higher wallet share and deeper client relations in the subsequent quarters. With that its top 5 accounts de-grew 5.2% QoQ, which balanced against sharp uptick (+4.2% QoQ) in ex-top 20 accounts. Despite this fact, the management expects to have healthy H2 on the back of large deal ramp ups and anticipated pass-throughs. On margins, the internal program has exceptionally pulled the margins in Q2 by 80 bps QoQ, while the rest 80bps achieved through INR depreciation. Given H2 will have disproportionate pass-throughs and wage hike impact, we are partially passing on the margins benefits to FY26. We are baking CC revenue growth of 5.1%/8.4%/8.5% YoY in FY26E/FY27E/FY28E, while keeping our margins at 14.9%/15.4%/15.7%. With that our EPS sees an upgrade of ~2% each in FY27E/FY28E. We roll forward and assign 25x PE to Sep’27E EPS for a TP of 5.470, full valuations. Retain HOLD