LTTS shares fall 9% as FY25 guidance lowers earnings visibility; Price targets, outlook & more

L&T Technology Services Ltd reported a solid set of March quarter results, but the IT firm guided for a 100-basis point fall in its FY25 EBIT margin, as it looks to build capabilities in order to secure future growth. This, along with a moderate revenue guidance, despite strong Q4 results, triggered a steep fall in LTTS shares on Friday morning.

L&T Technology Services shares fell 9.48 per cent to hit a low of Rs 4,689.50 on BSE.

The LTTS management guided for FY25 revenue growth of 8–10 per cent in constant currency CC terms despite the strong exit rate, which was below Antique Stock Broking's expectation of 10–12 per cent.

"In addition, the company is factoring in decision-making delays to continue due to rising geopolitical risks and continued tightening of financial conditions in the US markets leading to softness in EBIT margin for FY25. The 16 per cent EBIT margin near term guidance for FY25 was also lower than our expectations of 18 per cent margin for FY25/FY26," Antique said.

This brokerage cut its FY25 and FY26 EPS estimates by 10 per cent and 8 per cent due to the miss on both revenue and margin guidance. It cut LTTS target price to Rs 4,500 from Rs 5,000 earlier.

To recall, the LTTS management had guided for margin “going back” to 18 per cent by H1FY26 post the SWC acquisition, which had meant a gradual expansion in FY25 and FY26. Now, the management has suspended the 18 per cent guidance and would come back, with the new timeline thereof, in one–two quarters.

"This, in effect, shifts the entire margin expansion program forward, by at least four quarters," Nuvama said.

This brokerage cut its target valuations for LTTS to 30 times FY26 PE from 35 times, due to lower earnings visibility; downgrade to 'HOLD' with a target price of Rs 4,970 from Rs 6,300 earlier.

"We incorporate a weak spending environment and weak margin outlook resulting in 9 per cent EPS cut for FY2025-26E. Stock is expensive at 35 times FY2026E EPS. We cut Fair Value by 6 per cent to Rs 4,400, valuing the stock at unchanged 29X June 2026E EPS. Retain SELL," Kotak Institutional Equities said.