Brokerages split on LTM after Q1 margin beat offsets muted revenue growth
LTM's first-quarter earnings met expectations with a surprise margin expansion, but muted sequential revenue growth and a 34% year-to-date share price decline have left analysts sharply divided on the stock's near-term trajectory.
LTM posted a consolidated net profit of Rs 1,466 crore for the April-June quarter, up from Rs 1,254 crore a year earlier. Revenue rose 18% year-on-year to Rs 11,608 crore, translating to $1.2 billion.
While the headline numbers aligned with consensus, the underlying growth trajectory remained soft. Constant currency revenue grew just 0.3% quarter-on-quarter, a figure that highlights ongoing execution delays and broader macroeconomic headwinds facing the Indian IT sector.
The earnings release did offer a positive signal in profitability. LTM reported a 15.5% EBIT margin, catching analysts off guard on the upside. This resilience was partly driven by its largest accounts, with the top five clients posting 4.5% sequential growth in dollar terms compared to overall growth of just 0.1%.
The mixed performance has produced a fragmented reaction from major brokerages. Nomura pointed to a recovery in technology and financial services spending, keeping its 'Buy' rating with a target price of Rs 4,400. Nuvama also maintained its 'Buy' stance, though it cut its target price to Rs 5,500 from Rs 6,200. "We are trimming FY27E/FY28E EPS by 2.8%/3.6% due to slightly lower growth. We await further clarity before factoring the Randstad IT acquisition into our estimates," Nuvama said.
Other analysts remain cautious. JM Financial kept its 'Reduce' rating, raising its target to Rs 3,720 to imply an 8% downside, noting LTM must deliver over 2% sequential growth for the next three quarters to surpass its prior fiscal year's performance. Emkay retained an 'Add' rating with a Rs 4,350 target, flagging weak cash conversion and continued softness in Europe alongside pressure in consumer and manufacturing verticals.
The divergent forecasts underscore the uncertainty surrounding a stock that has dramatically underperformed. Despite a recent 9% rally over the past week, LTM shares closed at Rs 4,037.20 on Friday. The company's market capitalisation remains above Rs 1.2 lakh crore, but the stock is down 34% so far in 2026 and 22% over the past year.
For market participants, LTM represents a microcosm of the broader IT services dilemma. Strong deal wins and stabilizing margins at key accounts suggest a floor may be forming, yet the heavy reliance on a challenged European market and the lack of immediate sequential momentum mean the path to a full valuation recovery remains unclear.
