Latent View Analytics (LATENTVI IN) – Q2FY26 Result Update – Near-term margin hit, prioritizing growth – BUY

The revenue performance (+7.1% USD QoQ) exceeded our expectation (+5.0% YoY), primarily driven by momentum within Fin Services and Consumer Retail (led by DP). The growth within Tech vertical was weak (down 1% QoQ), attributed to a combination of productivity passthrough and limited insourcing within its top Tech accounts. We believe these challenges are industry-wide instead of company-oriented, which might have a near-term jerk, but equally have an upward bias to future growth. The high growth areas: Databricks engagement growing at ~80% YoY and the pipeline around GenAI (USD7mn) in Q2, gives strong visibility of growth momentum in H2 and beyond. The early efforts on investments are visible in scaling an FS account to USD6m+ band, the focus is in place to on-board similar potential accounts with additional SOWs and cross-selling activities. On margins, the company has trimmed adj. EBITDA margin band by 100bps to 22-23% for FY26, while long-term aspiration remains intact to achieve 24-25% band. The change in the near-term margin band is majorly due to (1) engaging in new scope of opportunities, and (2) investments in hiring senior leaders, Databricks practice and COE talent. We are largely keeping our EPS estimates unchanged, while passing on revenue beat and Q2 margin miss. We expect the USD revenue growth of 19.8%/21.1%/21.6%, while keeping our Adj. EBITDA margins at 22.6%/24.1%/24.5% for FY26E/FY27E/FY28E. The stock is currently trading at 35x FY27E earnings. We assign a 40x multiple to Sep’27E EPS, arriving at a target price of Rs. 600. Retain BUY.