LTTS - L&T Technology Services Limited Share Price

In the Q1 FY26 earnings conference call for L&T Technology Services Limited, management highlighted key aspects of their performance and outlook. Revenue for the quarter was reported at Rs. 2,866 crores, showcasing a 16.4% growth YoY but a 3.9% decline QoQ, largely due to seasonality in the Smart World segment. The company achieved significant large deal wins with a total contract value (TCV) exceeding USD 200 million, which included one $50 million deal and several in the $10 million range.

Management noted that the Sustainability segment is particularly strong, crossing the $100 million quarterly milestone with a 16.4% YoY growth and a 4.1% QoQ growth, indicating robust demand and a strong pipeline. The EBIT margin remained steady at 13.3% despite revenue challenges, with expectations for improvement in subsequent quarters.

Amit Chadha, CEO, emphasized a balanced three-segment approach allowing for growth in uncertain market conditions, and reaffirmed a medium-term revenue target of $2 billion with aspirations for double-digit growth in FY25. Management indicated that while the Mobility segment may experience short-term challenges, a turnaround is expected in the latter half of FY26. There was also a significant focus on AI and innovation, with over 206 patents filed in AI-related projects and the rollout of their proprietary AI framework, PLxAI.

Forward-looking points include the robust backlog and the anticipation of sizable deal closures, particularly in Sustainability, which are expected to drive revenue growth in the upcoming quarters. Furthermore, management aims to enhance operational efficiencies and margin improvements through strategic integrations and technology advancements.

1. Question from Manik Taneja: "Amit, some of your other peers seem to be slightly more positive with regard to the Automotive passenger vehicle demand while your commentary seems to be slightly more somber. Could you talk about this customer-specific impact?"

Answer: "The automotive sector is currently in flux, particularly as U.S. automakers are navigating uncertainty over EV investments compared to traditional models. European competitors face pressure from Chinese manufacturers offering lower-cost EVs. This creates challenges for OEMs, affecting decision-making and leading to pauses in some programs. Despite this, we continue to win significant deals, indicating a robust pipeline, though future performance may vary."

2. Question from Manik Taneja: "Could you also discuss the margin outlook, particularly regarding gross margins and SG&A going forward?"

Answer: "We are actively working on several levers to improve margins. A focus on high-quality revenue through large deal wins, particularly in Sustainability, coupled with productivity improvements such as operational efficiency, are key. We forecast that SG&A will remain between 10.5%-11.5%. We expect H2 margins to improve as strategic supports transition into billable work, supporting our goal of mid-16% EBIT margins by Q4FY27 or Q1FY28."

3. Question from Karan Uppal: "How is the revenue conversion tracking with strong deal signings, and can we expect the $200 Million deal win to be a new base for LTTS?"

Answer: "Our aim is indeed to maintain the $200 Million LDTCV as a baseline going forward, aligning with our segmented sales strategy. Overall, our revenue conversion has been in line with expectations. We see consistent growth outside of Smart World, reflecting solid execution. Although there were specific delays in Automotive projects, our pipeline is robust, and we are confident in our ability to sustain this level of performance."

4. Question from Vibhor Singhal: "Is the Smart World business's seasonal decline something that we will continue to see, and how does it impact overall performance?"

Answer: "The Smart World segment did see a significant seasonal dip from Q4 to Q1, primarily influenced by specific client dynamics. However, we are taking measures to stabilize this segment, focusing on selective contract bidding. We believe the impacts of these fluctuations will lessen over time, particularly as we secure more consistent work from our growing pipeline, including opportunities in the Middle East."

5. Question from Rahul Jain: "How is the Intelliswift integration progressing, and what are the growth expectations from this segment?"

Answer: "Intelliswift integration is on track, with a solid five-year growth plan in place. We are maximizing synergies by leveraging our established capabilities in Hyperscalers while targeting other subsegments like retail and fintech. We are confident in achieving our growth targets, and the pipeline looks promising, showing potential for significant contribution as we expand the business over this timeframe."