L&T Technology Services (LTTS IN) – Q2FY26 Result Update – Strong TCV wins improve visibility, but execution needs to catch up… – HOLD

The revenue growth (1.3% QoQ CC) was in line with our estimates. The growth was aided by ramp up of a large deal and continued momentum within Sustainability. The mobility business (ex-Auto) has picked up pace in the off-highway, rails and trucks segments, while Automotive sees incremental pauses and deferrals in decision making. The weakness in the Automotive is fairly balanced against the momentum within Sustainability, validated through securing USD100m deal in Q2 vs USD50m win in Q1. The quarter recorded highest ever deal wins of $300m LDTCV vs USD200m in the previous quarter, outcome of hiring a senior leader to pursue large deals and drive deeper client mining activities. The ask-rate for the rest of the year translates to ~3.0% CQGR to achieve high single-digit CC growth. We believe the continued ramp up of large deal within Sustainability and improving demand visibility within Tech vertical (USD60m win in Q2) should be a tailwind in H2 and beyond. Margins were largely stable despite Automotive weakness, aided by growing mix of high margin business and progressing Intelliswift integration. However, (1) Compensation revision, (2) Large deal ramp ups and (2) SWC pick up in Q4, are the anticipated headwinds in H2, which should keep the margins within a narrow band. We are building in 9.1%/9.0/10.0% CC revenue growth, while keeping our margins at 13.5%/14.7%/15.5% for FY26E/FY27E/FY28E. We are assigning 27x PE to Sep’27 EPS, translating a TP of 4,360. Retain HOLD.