Buy Larsen and Toubro; target of Rs 2442: LKP Research

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26 Aug, 2025 12:21

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L&T reported a descent quarter largely in-line with estimates. Order inflow remained strong during Q3 and is on track to achieve revenue and order inflow guidance of 12-15% while Company’s consolidated Revenues/Ebitda/PAT growing at 17%/12%/18% YoY while core sales grew 17% YoY on better execution. Margins witnessed pressure (contracted 60 bps) on account of adverse job mix, cost pressure and closure related cost. Given margin pressure witnessed in core business, management expects some moderation in its margin guidance for FY23 and now expects margin to decline 30-50 bps YoY as against its earlier guidance of 30 bps YoY improvement in FY23. Strong order inflow at ₹607bn, +21% y-o-y) while order book stood at ₹3,866bn (+14% y-o-y / +4% q-o-q) with a 3.2x TTM core sales. Management has indicated a strong prospect pipeline of ₹4.9 tn for 4QFY23 across both domestic (₹3.8 tn) and international (₹1.05 tn) led by multi-year high private capex providing strong revenue visibility ahead. Award to tender ratio has also improved from 48% in 9MFY22 to 52% in 9MFY23. NWC/ Sales ratio improved to 19% in 9MFY23 vs 22.9% in 9MFY22. It expects to maintain working capital around 19-20% of net sales for the full year.

We maintain BUY with a revised PT of ₹2,442. We believe, riskreward is favorable for L&T given reasonable valuation. Further, L&T’s ‘Lakshya 2026 Plan’ is focusing on scaling up new business opportunities which are now in the incubation phase and are expected to bring significant benefits in future.

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