Larsen & Toubro maintains guidance of 10% growth in order inflows, for FY26

Larsen & Toubro (LT) reported revenue/EBITDA/APAT at INR 636.8/63.2/36.2bn. This is a beat/(miss) of +0.5/-2.2/+4.3%. The compay’s profitability was aided by lower finance cost and marginally higher treasury income. P&M margins stood at 7.6% (+flat YoY).

LT continues to maintain guidance of 10% order inflow growth (vs. flat expectation) for FY26 on a high FY25 base and 15% revenue growth (in-line), with P&M margin guidance at 8.5%. NWC to sales ratio stood at 10.1% (Q4FY25: 11%) and LT maintained FY26 guidance at 12%. Adjusted for delay in water payments, Q1FY26 NWC stood at 9.25%. Given the high share of export order inflows in the mix (58% for FY25), it expects FY26 execution to have an increasing proportion of lower-margin fixed-price contracts (Q1FY26 – 46% the order book, baked into its margin guidance).

Material margin expansion is expected from FY27E, when the hydrocarbon project mix increases. The company guided that margin re-rating will be led by execution ramp-up. Given (1) the record-high order book (OB) of INR 6.1 trn, (2) the likely bottoming out of infrastructure margins, (3) improvement in subsidiary performance, and (4) higher public capex toward a green economy, we maintain our BUY stance with an SOTP-based target price of INR 4,287 per share (29x Mar-27E EPS). Marginal increase in target price owing to upward calibration of subsidiary valuations.

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Source : HDFC Securities Institutional Equities

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