LTM growth set to accelerate as AI traction and Randstad acquisition support

Investment View and Valuation

In its July 28, 2026 result update, ICICI Direct Research remains constructive on LTM Ltd (erstwhile LTIMindtree). The broker maintains its BUY rating and values the company at 22 times FY28E earnings per share, with a target price of Rs 5,100 against a CMP of Rs 4,335.

The investment case is supported by an expected acceleration in revenue growth, resilient margin expansion, increasing contribution from AI-led services, broad-based client growth, continued deal momentum, the planned Randstad acquisition and management's Lakshya '31 objective to double revenue by FY31. This objective implies approximately 15 per cent CAGR over FY26-31.

Q1FY27 Financial Performance

LTM reported modest Q1FY27 constant-currency revenue growth of 0.3 per cent quarter-on-quarter and 6.4 per cent year-on-year. Dollar revenue was US$1,224 million, while rupee revenue was Rs 11,608 crore.

Profit was helped by the Saudi joint venture ramp-up and a valuation gain on the Voicing.AI investment, partly offset by hedge losses.

Growth Outlook and Segment Trends

Growth in the quarter was constrained by delayed project ramp-ups in India, including the CBDT deal, and delayed hardware shipments in the Middle East following the war impact. Management expects these headwinds to normalise from Q2FY27 and expects Q2FY27 revenue growth to exceed Q1FY27.

Management also expects FY27 to be better than FY26 on both revenue and margins, with organic revenue growth stronger than FY26's 6 per cent year-on-year dollar growth. Regional constant-currency growth was 5.5 per cent year-on-year in North America, 8.3 per cent in Europe and 10.4 per cent in Rest of World. LTM derives less than 3 per cent of its revenue from the Middle East.

Under LTM's reclassified segments, Financial Services accounted for 34 per cent of revenue and Technology accounted for 20 per cent. Both segments grew in dollar terms quarter-on-quarter, while Consumer and Production declined.

Consumer was affected by the CBDT ramp-up and Middle East hardware-shipment delays. Total contract value was US$1.68 billion, flat quarter-on-quarter and up 3.1 per cent year-on-year. Net headcount declined by 64 to 87,886, while attrition was flat quarter-on-quarter at 13.3 per cent.

AI-Led Services and BlueVerse

AI revenue across Business AI, Creative AI and Industrial AI reached an annualised quarterly run rate of approximately US$150 million, equivalent to 12 per cent of revenue. ICICI Direct believes LTM's BlueVerse platform, outcome-based AI engagements and healthy pipeline are improving growth visibility.

Management stated that productivity-linked pricing discussions with key clients are behind it and does not expect AI productivity discounts, as productivity is built into engagements upfront.

BlueVerse initiatives include BlueVerse Currency outcome-based pricing, the AI1000 talent initiative, an investment in Uniphore for small-language-model capabilities and an OVHcloud partnership for sovereign AI deployments in Europe.

Margin Expansion and Randstad Acquisition

Margin expansion continued despite an approximately 100-basis-point impact from partial wage hikes. New Horizon operational efficiencies added about 40 basis points and foreign-exchange benefits added about 100 basis points, alongside benefits from the earlier Fit4Future initiative.

Management expects organic margins to improve through FY27, supported by stable selling, general and administrative costs, higher utilisation and AI-led productivity.

The Randstad acquisition is expected to close by the beginning of Q3FY27, subject to progressing regulatory approvals. Management expects no material margin dilution after consolidation and sees similar or better margins than the preceding year.

Broker Estimates

ICICI Direct raised its FY27E and FY28E revenue estimates by 3.7 per cent and 2.6 per cent, respectively. FY27E and FY28E earnings per share estimates were raised by 2.5 per cent and 0.5 per cent, respectively.

The broker forecasts dollar revenue CAGR of 13.5 per cent over FY26-28E. Estimated EBIT margins are 15.4 per cent in FY27E and 15.0 per cent in FY28E, compared with 14.1 per cent in FY26.

Key Risks

• Lower-than-expected revenue growth and margin expansion.
• Slower-than-expected ramp-up of large deal wins.