Buy Larsen & Toubro Ltd For Target Rs. 4,409 By Geojit Financial Services Ltd
Strong Order Inflow Boosts Revenue Growth
Larsen & Toubro Ltd (L&T) is an engineering and construction (E&C) conglomerate with presence in the information technology (IT) and financial services sectors. The company has operations in more than 30 countries.
* Consolidated revenue in Q2FY26 grew 10.4% to Rs. 67,984cr, driven by revenue growth in the energy (+47.5% YoY), hi-tech manufacturing (+30.1% YoY), and IT and technology services (+11.6% YoY) sectors. However, revenue from infrastructure projects declined 0.6% YoY.
* Order inflow increased 45.0% YoY to Rs. 115,800cr owing to strong growth in both international and domestic orders, led by infrastructure and hydrocarbon energy projects.
* EBITDA increased 7.0% YoY to Rs. 6,806cr owing to the higher topline. However, EBITDA margin decreased by 30bps to 10.0% because of a margin compression in the IT and technology services portfolio.
* The reported PAT increased by 14.0% to Rs. 4,687 crore, owing to higher EBITDA, non-operating income, and a drop in finance costs.
Outlook & Valuation
L&T’s performance in Q2FY26 was robust, with strong growth in order inflow and revenue increase in all segments, except for infrastructure projects. The company anticipates healthy revenue growth and a significant increase in order inflow, indicating a promising performance in the future. Furthermore, its healthy order book is expected to drive strong performance in the upcoming quarters. The government's continued investment in infrastructure and the manufacturing sector is likely to provide substantial growth opportunities for the company, bolstering its prospects for sustained success. Recent strategic MOUs and partnerships in the company's renewables, green energy, defense, and semiconductor businesses have laid a strong foundation for future growth, positioning the company for long-term success. Therefore, we reiterate our BUY rating on the stock with a revised target price of Rs. 4,409, based on SOTP valuation.
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SEBI Registration Number: INH200000345
