Buy Larsen and Toubro; target of Rs 4550: Sharekhan

Sharekhan's research report on Larsen and Toubro

L&T by virtue of its leadership and diversified offerings in the EPC domain would be a key beneficiary of the government’s infrastructure thrust and capex revival in private sectors. Further, increased investments in infrastructure, and hydrocarbon in GCC region provide diverse opportunities. Given a strong order book at ~Rs 5.1 lakh crore (2.2x TTM revenue) and order prospects of Rs. 8.04 trillion, we expect robust execution going forward. Multiple margin tailwinds – easing supply chain, stable commodity prices, and higher margin orders indicate margin recovery from FY2025. Focus on sunrise sectors such as green hydrogen, data centres, e-commerce as well as defence would lead to further diversification.

Outlook

We maintain BUY on L&T with a PT of Rs. 4,550, given strong execution and margin tailwinds and improving return rations in the capex upcycle.