Buy Larsen and Toubro; target of Rs 2481: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Larsen and Toubro

We revise our estimates by 0.6%/0.8%/3.2% for FY23/24/25, led by execution pick-up, healthy order book (Rs3.9trn), likely margin revival in core business, improving Hyderabad metro performance and improved working capital to sales ratio. In Q3FY23 LT reported healthy quarterly performance with consolidated revenue growth of 17.3% YoY. EBITDA margins were impacted (down 51bps YoY) due to higher employee expenses for IT services business. NWC to sales improved to 19% in Q3FY23 vs 22.9% in Q3FY22, due to better collection. Management is confident of achieving upper end of FY23 revenue and order inflow growth guidance of 12-15%, while core EBITDA margin guidance has been downgraded to ~9% vs 9.5% guided earlier, owing to lower margins booked in H1FY23. NWC to sales to be 19-20% for FY23. L&T is well-placed to benefit from overall diversified tender prospects with 1) better order conversion in domestic market, 2) significant traction in capex from oil exporting countries mainly in hydrocarbon segment and 3) expected uptick in private capex.

Outlook

The stock is currently trading at PE of 27.7x/24x/20.1x FY23/24/25E. Maintain BUY rating with TP of Rs2,481 (Rs2,384 earlier).

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Larsen & Toubro - 31 -01-2023 - prabhu