Buy Larsen and Toubro; target of Rs 4025: Prabhudas Lilladher

Prabhudas Lilladher's research report on Larsen and Toubro

We revise our FY26/27E EPS estimates by -2.5%/+2.9% factoring in a higher mix of P&M in revenue mix and pick up in core margins respectively. Larsen & Toubro (L&T) reported consol. revenue growth of 17.3% YoY, while EBITDA margin fell 77bps YoY to 9.7%. NWC to sales rose to 12.7% (vs 16.6% in Q3FY24) owing to better gross working capital to sales ratio and strong collections. L&T continues to demonstrate strong execution capabilities in international markets, while domestic execution is poised to gain momentum in Q4FY25. The company’s opportunity pipeline remains robust, bolstered by prestigious order wins during the quarter, including a Thermal BTG order, a repeat order for the K9 Vajra, and an EPC contract for a gigascale solar power plant. Additionally, L&T’s strategic foray into the semiconductor, data center, and green hydrogen sector will bolster its long term growth. Internationally, order prospects remain strong, particularly in the Middle East, driven by increased investments in oil & gas, carbon capture, renewable energy, and thermal power projects. Reinforcing its growth outlook, management has reiterated its confidence in surpassing its order intake and revenue guidance for FY25.

Outlook

The stock is currently trading at a P/E of 23.9x/19.1x on FY26/27E earnings. We maintain ‘Buy’ rating and roll forward to Sep’26 with a revised SoTP-derived TP of Rs4,025 (Rs4,088 earlier), valuing the core business at a P/E of 25x Sep’26E (26x FY26E earlier).