L&T Q1 preview: Robust profit growth on strong execution; but weaker order flows may limit near-term upside

The firm’s consolidated revenue is projected to rise 15 percent YoY to Rs 63,451 crore, while EBITDA (earnings before interest, taxes, depreciation, and amortisation) is expected to remain flat at 10.2 percent.

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26 Aug, 2025 12:21

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Larsen & Toubro (L&T) is expected to report robust Q1FY26 results on July 29, led by strong execution across its international and E&C segments.

According to a Moneycontrol poll of six brokerages, the net profit of the engineering, procurement, and construction (EPC) major is expected to grow 25 percent year-on-year (YoY) to Rs 3,469 crore. The brokerages added that a combination of weak order inflows, segmental margin pressure, and a cautious project conversion cycle, especially in the Middle East, may limit upside in the near term.

The firm’s consolidated revenue is projected to rise 15 percent YoY to Rs 63,451 crore, while EBITDA (earnings before interest, taxes, depreciation, and amortisation) is expected to remain flat at 10.2 percent.

The most optimistic is Emkay Securities which expects the net profit to rise by 25.3 percent to Rs 3490 and most pessimistic is Nuvama which expects the net profit to rise by 18.5 percent to Rs 3300.

Key earnings drivers:

Execution momentum

The brokerages expect strong execution to drive topline growth, especially in overseas projects. Kotak projects 19 percent YoY growth in core EPC revenues, with international execution offsetting domestic softness. Nomura expects 18 percent growth in core revenues amid strong contribution from power T&D (transmission & distribution) and B&F (buildings & factories) segments.

MOSL pegs consolidated revenue growth at 12 percent, led by infrastructure and hydrocarbon execution, while Nuvama notes support from the completion of legacy projects and ongoing strength in Middle East delivery. Nomura attributes the profit growth to execution-linked scale benefits, while MOSL highlights margin preservation despite input cost volatility. Service segment earnings (including IT and finance) are expected to remain steady.

Execution progress in Saudi Arabia and the GCC is a key earnings lever, with Kotak and MOSL stressing its importance for both revenue growth and margin stability.

More than 50 percent of L&T’s core E&C revenue is tied to the public sector, making post-election guidance on central / state capex crucial.

Nomura expects further commentary around international ordering trends amid geopolitical uncertainty, and visibility on execution timelines in large infra and water projects.

Stable margins

The consolidated EBITDA margin is likely to be flat YoY. Nomura sees core EBIT margin improving 17 basis points (bps) YoY to 6.4 percent, though service segment margins may fall sharply by 174 bps to 14.8 percent, dragging down the consolidated performance.

Kotak expects an E&C margin of 8 percent, supported by a higher hydrocarbon mix, but notes that early-stage execution of these projects may not be margin accretive. MOSL sees margins expanding 20 bps YoY but declining sequentially due to a high Q4 base.

Order inflows

Order flow momentum is expected to remain weak. Nomura forecasts Q1 inflows of Rs 397 billion, driven by power T&D and B&F. However, Kotak expects a YoY decline that's in the mid-teens, citing a slower-than-expected start to FY26. MOSL highlights a lag in order conversion in the Middle East and subdued private sector participation. Nuvama points to continued reliance on public sector capex and suggests that while smart city, rail, and water projects remain active, broad-based pickup is still lacking.

What analysts will watch for

Analysts will track the company’s FY26 order flow guidance, especially on delayed Middle East conversion and the pace of domestic orders. Updates on government capex visibility, core vs services margin trajectory, and the working capital cycle will also be key, along with green energy initiatives (like hydrogen and battery storage).

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.