Near term headwinds; Long term growth story intact …
About the stock: Larsen & Toubro (L&T) is India’s largest engineering & construction (E&C) company, with interest in EPC projects, hi-tech manufacturing and services. The company primarily operates in infrastructure, heavy engineering, defence engineering, power, hydrocarbon, services business segments
• Infrastructure segment contributes ~47% of consolidated revenue followed by services (~27%), energy projects (19%) and international markets (52% of backlog from international markets)
Q4FY26 Performance: L&T reported consolidated revenues of ₹82,762 crore in Q4FY26, up 11% YoY, driven by steady execution across Infrastructure, Energy and Hi-Tech Manufacturing segments. Order inflows stood at ₹89,772 crore, with international orders contributing 67%. The consolidated order book rose ~28% YoY to ₹7.40 lakh crore, providing strong revenue visibility. Recurring PAT for the quarter increased 5% YoY to ₹5,289 crore, while EBITDA grew 5% YoY to ₹8,610 crore with margins at 10.4%. Reported PAT stood at ₹5,326 crore (down ~3% YoY), impacted by base effect of prior-year exceptional gains.
Investment Rationale:
• Growth Visibility backed by Robust Order Book and healthy guidance: L&T offers strong revenue visibility supported by a record order book of ₹7,40,327 crore (+28% YoY), providing multi-year execution (~2.6x book-to-bill) clarity across Infrastructure, Energy and Manufacturing segments. Management has guided for 10–12% revenue and order inflow growth in FY27, indicating sustained momentum despite a high base. Over the medium term, under the Lakshya’31 plan, the company targets 12–15% annual revenue growth, driven by a diversified business mix, increasing international exposure (~52% order book), and continued capex momentum across infrastructure, energy transition and industrial sectors. This visibility is further supported by a robust FY26 order inflow of ₹4,35,590 crore (+22% YoY), reinforcing confidence in sustained topline growth trajectory.
• Structural Growth Drivers with Portfolio Transformation: L&T is well positioned to benefit from structural themes such as energy transition (green hydrogen, carbon-lite solutions), digital infrastructure (data centers, semiconductors), and global EPC opportunities. The company is actively reshaping its portfolio through strategic exits (Nabha Power, Hyderabad Metro) and capital recycling, which should improve return ratios and balance sheet efficiency. Additionally, scale benefits, improving execution, and cost optimization (AI/digital adoption) are expected to support margin stability over the medium term despite near-term pressures in Energy projects. The combination of high-growth segments and disciplined capital allocation provides a strong platform to deliver sustainable earnings growth aligned with the 12–15% long-term revenue CAGR ambition under Lakshya’31
Rating and Target Price
• Overall, we expect revenues and PAT to grow at CAGR of 15.4% and 15.2% over FY26-FY28E. We maintain BUY rating with target of ₹4955 (SoTP based).
