Buy Larsen and Toubro; target of Rs 4004: Prabhudas Lilladher

Prabhudas Lilladher's research report on Larsen and Toubro

Larsen & Toubro (L&T) reported consol. revenue growth of 10.9% YoY, while EBITDA margin improved 24bps YoY to 11.0%. L&T continues to exhibit strong growth prospects across key segments such as Hydrocarbon, Heavy Civil, Transmission & Distribution, and Renewable Energy, both in domestic and international markets. Notably, its recent ultra-mega order from Qatar Energy underscores its growing presence in the Middle East. Furthermore, L&T’s strategic expansion into emerging sectors like semiconductors, data centers, and green hydrogen is expected to drive long-term growth. Operationally, the net working capital (NWC) to sales ratio improved to ~11% in FY25 (vs ~12% in FY24), supported by better gross working capital management and strong collections. While geopolitical instability and supply chain disruptions warrant a measured approach, the management’s FY26 guidance of ~10% order intake growth, ~15% revenue growth, and P&M margins of ~8.5% reflects confidence in the company’s robust execution capabilities and resilient business model.

Outlook

The stock is currently trading at a P/E of 24.6x/19.7x on FY26/27E earnings. We maintain ‘Buy’ rating and roll forward to Mar’27 with a revised SoTP-derived TP of Rs4,004 (Rs3,920 earlier), valuing the core business at a P/E of 25x Mar’27E (25x Sep’26 earlier).

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