Fractal Analytics (FRACTAL IN) – Q2FY27 Result Update – Balancing the growth equation, fuelling investments – BUY
Published on 04 Nov 2026
Management is targeting an annualized product rev. run rate of ~USD100mn over the next 12 quarters. On profitability, GM declined 225bps YoY to 44%, due to investments in senior AI engineering/FDE talent (-279bps) and wage hike (-216bps), partly offset by currency benefits (+270bps). However, operating leverage in SG&A helped protect EBITDA margins. Management expects GM to recover meaningfully in H2FY27 as wage-hike impacts normalize and incremental AI engineering capacity gets deployed. While strong momentum in BFSI and HLS to support growth in H2, management expects TMT to maintain steady state. Accordingly, we maintain our FY27E/FY28E/FY29E CC rev. growth est. at 11.3%/16.5%/15.3%. However, we raise EBITDA margin est. to 17.5%/18.5%/19.3% from 17.0%/18.0%/18.7%, factoring in the Q2 beat and scope of improving billable FTE. We continue to value the company at 17x EV/EBITDA to arrive at a target price of INR 1,060 and maintain our BUY rating.
