Prabhudas Lilladher keeps a Hold rating on LT Technology Services following a strong second-quarter performance. While the company outperformed revenue and margin expectations, analysts see limited upside at current valuations, setting a target price of Rs 3,390.
Q2 Performance and Margin Dynamics
LT Technology Services reported a robust second quarter for fiscal year 2027, with revenue growing 2.7% quarter-on-quarter in constant currency terms. This result outperformed brokerage estimates of 1.9%. Profitability also improved, with EBIT margins expanding by 60 basis points to reach 16.3%, clearing the projected 16.0% mark. Growth was primarily fueled by the sustainability segment, which rose 4.9%, and the mobility division, which added 2.3% on the back of demand in aerospace and rail, despite ongoing challenges in the European automotive market. The technology sector faced a slight setback, declining 0.9% due to planned reductions in medical technology projects.
Strategic Outlook and Deal Flow
Large deal wins remained a strong point for the company, with total contract value reaching US$203 million. Notably, over half of these new deals are driven by artificial intelligence. Annualized revenue from Engineering Intelligence solutions has now scaled to US$120 million, representing roughly 9.5% of total revenue. Management maintains an optimistic stance on revenue momentum for the second half of the fiscal year, supported by an improving deal pipeline. However, analysts at Prabhudas Lilladher remain cautious regarding profitability. While the company achieved its mid-16% EBIT margin goal earlier than anticipated, expectations for the latter half of the year include potential headwinds from scheduled wage hikes. Consequently, the firm has adjusted its EBIT margin estimates for fiscal years 2027 and 2028 to 15.7% and 15.9%, respectively.
Valuation and Market Stance
The brokerage firm has set a price target of Rs 3,390, based on a valuation of 20 times the September 2028 estimated earnings. Analysts suggest that the stock’s current trading price already accounts for the company’s recent operational successes, leaving little room for significant near-term appreciation. As a result, the firm has reiterated its Hold rating on the equity.