Latent View Analytics AI-led demand and pipeline support growth despite margin pressure

Investment View and Valuation

ICICI Direct Research retains its BUY rating on Latent View Analytics, with a target price of Rs 350 based on 26 times FY28E earnings per share. The target multiple has been reduced from 30 times previously, reflecting softer expected FY27 growth of about 12 per cent.

The broker describes Latent View Analytics as a leading pure-play data analytics services company in India, with capabilities across the data analytics value chain. It expects partnerships with Databricks, OpenAI and Anthropic, together with increasing AI monetisation, to support healthy double-digit growth over FY27E and FY28E.

The medium-term outlook is supported by expanding capabilities, a healthy deal pipeline and potential strategic acquisitions in Healthcare, Life Sciences and Data Engineering. Management said discussions for these acquisitions are advanced and that a letter of intent has been signed.

Q1 FY27 Financial Performance

Reported Q1 FY27 consolidated revenue was Rs 287 crore, down 0.6 per cent quarter-on-quarter but up 21.5 per cent year-on-year. Dollar revenue declined 3.5 per cent sequentially due to the completion of one-off Decision Point projects, delayed project extensions, client-specific insourcing at a large Technology account and volume discounts to a large BFSI client.

EBITDA increased 12.4 per cent year-on-year but declined 16.1 per cent sequentially, while the EBITDA margin fell to 19.8 per cent from 23.4 per cent in Q4 FY26. PAT declined 14.5 per cent quarter-on-quarter and 6.8 per cent year-on-year to Rs 47 crore.

AI Adoption and Growth Pipeline

Management said 81 per cent of engagements incorporated AI in Q1 FY27, while 35 per cent of revenue came from primary AI-led projects compared with 28 per cent in FY26. Management guided for around 12 per cent revenue growth in FY27, with potential upside if the pipeline converts successfully.

Demand visibility includes more than 15 AI-led opportunities, multiple large deal pursuits and expansion opportunities across Financial Services, Technology, Healthcare and Retail. Management expects a strong recovery in Q2 FY27.

• Technology: The large-client insourcing headwind has largely played out. A confirmed US$15 million extension pipeline and more than 14 opportunities of over US$0.5 million each are expected to support growth.
• CPG and Retail: The vertical is expected to recover by more than 25 per cent sequentially in Q2, supported by an approximately US$26 million pipeline and about US$2 million of extension opportunities.
• BFSI: BFSI remained the strongest vertical growth driver.
• Industrial: The pipeline includes AI data-centre infrastructure, automotive and manufacturing analytics.

Margin Outlook and AI Investments

Q1 FY27 margin pressure reflected annual wage hikes of about 270 basis points, lower revenue following the completion of one-off CPG projects and client-specific insourcing of about 190 basis points, as well as seasonal visa and marketing costs. Lower travel costs offset about 100 basis points of the pressure.

Management expects another 40 to 50 basis points of impact from wage hikes in Q2 FY27 and guides for FY27 EBITDA margin of around 20 to 22 per cent, despite investments in AI leadership, partnerships and capabilities.

The company is creating a dedicated Chief Technology and AI Officer organisation and an AI Foundry platform. ICICI Direct expects AI-led productivity gains, outcome-based pricing and revenue acceleration to improve operating leverage. The broker forecasts EBITDA margins of 21.3 per cent in FY27E and 22.4 per cent in FY28E.

Broker Estimates

ICICI Direct has reduced its FY27E estimates following the weaker near-term performance. FY27E revenue has been cut by 6.5 per cent, EBITDA by 9.4 per cent, PAT by 12.2 per cent and diluted EPS by 12.2 per cent.

Key Risks

• Slower-than-expected revenue recovery could affect the growth outlook.
• Lower-than-expected margin expansion could affect earnings estimates and valuation.