L&T Tech shares tank 8%, end at 52-week low after guidance cut, brokerages cautious

Shares of L&T Technology Services (LTTS) ended with losses of nearly 8% on Friday, January 16, after it reported weaker-than-expected third quarter, impacted by an ongoing business recalibration that weighed on revenues.

LTTS has decided not to pursue renewals in select low margin accounts as it pivots its strategy towards improving profitability.

Constant currency revenue declined 2.8% quarter-on-quarter, compared with expectations of 1.5% growth. EBIT margin, however, came in at 14.6%, ahead of estimates of 13.7%.

Profit after tax was also impacted by an exceptional loss of ₹35.4 crore during the quarter.

The company lowered its FY26 guidance, shifting from an earlier expectation of double-digit constant-currency revenue growth to mid-single-digit overall growth, as it prioritises margin improvement over topline expansion.

HSBC cuts target on LTTS

Brokerage firm HSBC, which has a 'Hold' rating on LTTS, cut its price target to ₹4,745.

The brokerage said the business recalibration resulted in a disappointing Q3 performance, and mentioned that the revised guidance implies an organic revenue decline in FY26.

HSBC added that the unchanged medium-term margin target raises questions on the benefits of the recalibration, while FY27 growth expectations also remain uninspiring.

While it acknowledged L&T Tech's strong ER&D capabilities, HSBC cited weaker near-term growth compared with peers.

Nomura maintained its 'Reduce' rating on the stock with a price target of ₹3,900.

The brokerage said restructuring led to a sharp revenue miss in Q3, with the impact estimated at around 5% of the business. However, Nomura noted strong deal wins and a robust pipeline, and expects EBIT margins to recover steadily over FY26-28.

The brokerage said that the stock currently trades at around 29 times its FY27 earnings, and said a key upside risk would be stronger than expected growth and margin improvement.

JPMorgan has a 'Neutral' rating and a price target of ₹4,650 on the stock.

The brokerage said Q3 revenues missed expectations sharply, while FY26 growth guidance was cut to mid-single-digit from double-digit levels due to portfolio rationalisation under the company's 'Lakshya' strategy.

As part of this strategy, L&T Tech has opted not to renew certain low margin contracts within its software and services business as well as outside it.

The foreign brokerage said this decision resulted in a revenue loss of $15 million during the third quarter, translating into an annualised run rate of about $60 million. This is likely to weigh on FY27 growth, given the weak exit rate of minus 1%.

However, the brokerage added that the move is already aiding margin recovery, with EBIT margin rising to 14.6%, and management now aiming to achieve 16.5% margins earlier than its guided timeline of the fourth quarter of FY27 to the first quarter of FY28.

Of the 32 analysts that have coverage on LTTS, 11 of them have a 'Buy' rating, 12 recommends 'Hold', while nine others have a 'Sell' recommendation on the stock.

Shares of L&T Technology Services ended 7.9% lower on Friday at ₹3,908.9. The stock is down 30% from its 52-week high of ₹5,645.