Buy Larsen and Toubro; target of Rs 4450: ICICI Securities

ICICI Securities research report on Larsen and Toubro

Larsen & Toubro (L&T) continues to beat order inflow (OI) expectations. It secured INR 766bn worth of orders in its core businesses (ex-services), up 40% YoY – aided by the energy (3.5x YoY; 41% of OI) and infrastructure (+2% YoY; 53% QoQ) segments. Order prospect of INR 14.8trn – international/domestic INR 9trn/INR 6trn – remains robust. We believe the order prospect for hydrocarbon projects is strong. While management guides for OI of +15% YoY for FY26, we expect L&T to beat its guidance comfortably. Core margin of 7.6% (flat YoY) was a tad disappointing, but we expect improvement over the fiscal. Note – the stock, at CMP, is trading at a lower band (25x FY27E core earnings) vs. historical valuation.

Outlook

Thus, we expect it to re-rate on improving core earnings growth. Maintain BUY and TP of INR 4,450.

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