LTTS zooms up over 11%

L&T Technology Services (LTTS) is currently the top gainer on the BSE, rising 11.37% to Rs. 4,020.20. The stock opened at Rs. 3,848 against its previous close of Rs. 3,609.80 and touched an intraday high of Rs. 4,140.50. Trading activity was strong, with 3.01 lakh shares traded and turnover of Rs. 121.36 crore. Market depth was almost evenly matched, with sell quantity at 15,195 shares against buy quantity of 14,383, suggesting some profit booking after the sharp rise.

Trigger

• Q2 FY27 revenue rose 12.1% YoY and 3.4% QoQ to Rs. 3,040.4 crore.
• EBITDA increased 23.5% YoY to Rs. 585.8 crore, with margins expanding to 19.3% from 17.5% a year earlier.
• EBIT jumped 29.8% YoY to Rs. 496.6 crore, while EBIT margin improved 60 bps QoQ to 16.3%.
• Net profit rose 66.8% YoY to Rs. 548.2 crore, including a one-time gain of Rs. 165 crore from divestment of the SWC business.
• Net income from continuing operations rose 19.7% YoY to Rs. 379.6 crore.
• Large deal wins exceeded $200 million during the quarter, with AI-related deals accounting for over 50% of the total.
• Board declared an interim dividend of Rs. 20 per share, with October 27 as the record date.

The biggest positive is the combination of accelerating revenue growth and improving operating margins. LTTS delivered 2.7% sequential growth in constant currency, while EBIT margin expanded to 16.3%. Sustainability recorded its strongest growth during the quarter, Mobility maintained momentum, and gross margins improved across all business segments. This suggests the improvement is being driven by operating performance rather than merely accounting gains.

The AI component is particularly significant. More than half of the quarter's large-deal value came from AI-related projects, including a $75 million deal. with AI applications across manufacturing, robotics, product development and supply chains. Its collaboration with NVIDIA on physical AI is another growth initiative. Unlike conventional IT services, these are specialised engineering applications where client relationships and technical expertise can offer competitive advantages.

Management expects stronger revenue momentum in H2 FY27, supported by an improving order backlog and deal pipeline. It has reiterated its longer-term ambition of 13–15% revenue CAGR and EBIT margins of 16–17% over the next five years.

The caution is that the headline 66.8% profit growth overstates the underlying earnings improvement, as it includes the Rs. 165 crore exceptional gain. Excluding this, underlying profit growth is closer to 16–20%, depending on the measure used.

At Rs. 4,020, the stock trades at around 27.5x consolidated PE, leaving limited room for disappointment. The next test will be converting the $200 million-plus deal wins into revenue while sustaining margins, particularly after today's sharp rally.