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Better than expected performance

LT’s consolidated results and core EPC segment outperformed our estimates in 1QFY27. We see positives in 1) healthy 14% YoY growth in core E&C order inflows, 2) core E&C revenue growth of 3% YoY, and 3) flat margins at 7.6%. NWC at 4.9% of sales and RoE at 16.1% remained strong despite a challenging environment across domestic and international markets. The prospect pipeline for the remaining 9MFY27 is strong at INR15t, with ordering activity in the Middle East likely to ramp up from 2QFY27 onward. Despite lower ordering from the Middle East region, LT has diversified its order inflow mix from other geographies such as Europe and has also seen stable inflows from the domestic private sector. We marginally revise our estimates to bake in 1QFY27 performance and retain BUY on LT with an SoTP-based TP of INR4,550, valuing core business at 25x Sep’28E earnings and 25% holding company discount for subsidiaries.

Beat across all metrics in core business

LT reported consolidated revenue/PAT of INR679b/INR41b (+7%/+14% YoY), which were 6%/7% ahead of our estimates. Absolute consolidated EBITDA declined 3% YoY to INR61b (in line with our est.), while EBITDA margin stood at 9.0% vs. our estimate of 9.7%. For the core E&C business, order inflows came in 27% above our estimates at INR873b (+14% YoY), taking the closing order book to INR7.8t (+27% YoY). Core E&C revenue came in at INR471b (up 3% YoY), 4% above our estimates, while core E&C EBITDA margin stood at 7.6%, flat YoY vs. our estimate of 7.3%. Beat on inflows was driven mainly by multiple order wins in the infra segment across residential & commercial buildings and ferrous metal projects, and an ultra-mega win in the offshore wind business. NWC to revenue ratio improved 520bp YoY to 4.9%, whereas RoE (TTM) stood at 16.1%, which included a 100bp impact on labor code provisions in 3QFY26.

Core E&C margins remain healthy

For 1QFY27, core E&C EBITDA margin (including realty) remained flat YoY at 7.6% vs. our estimate of 7.3%, while consolidated EBITDA margin declined to 9.0% in 1QFY27 from 9.9% YoY, mainly due to slower project execution, higher ECL provisions and forex impact in IT businesses

* Infrastructure and utility segment margin contracted 40bp YoY to 5.1%, mainly due to change in revenue mix and an increase in credit provisions on account of expected delays in collection of receivables.

* Energy - conventional segment margin stood at 7.6% vs. 7.5% last year.

* Energy - green segment, which includes the renewables and offshore wind business, reported margin of 6.0% vs. 6.1% last year.

* Manufacturing and products segment, which includes the hi-tech business, along with construction equipment and industrial product design and development businesses (reported in Others segment earlier), reported an EBITDA margin of 15.2% vs. 17.5% last year.

* Realty business (earlier part of Others segment) reported margin of 36.9% vs. 48.8% last year.

Valuations and view

At the current price, for core E&C, LT is trading at 31x/28x/22x P/E on FY27/28/29E earnings. We arrive at a revised SoTP-based TP of INR4,550 (INR4,500 earlier), based on 25x on Sep’28E earnings for core business and a 25% holding company discount to subsidiaries. Adjusted with subsidiary valuations, the stock trades at 22x P/E Mar’28E for core E&C.

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