'Buy' L&T, GAIL, 'Add' Asian Paints, KEC, 'Reduce' Heidelberg Cement, Says HDFC Securities Post Q1 Results

Larsen and Toubro reported revenue/Ebitda/adjusted profit after tax at Rs 636.8/63.2/36.2 billion, a beat/(miss) of +0.5/-2.2/+4.3%, aided by lower finance cost and marginally higher treasury income. Asian Paints Ltd.'s consolidated revenue declined 0.3% YoY to Rs 89.4 billion (our estimate: Rs 90.2 billion).

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HDFC Securities Institutional Equities

Larsen & Toubro - In-line performance; strong order inflow

Larsen and Toubro Ltd. reported revenue/Ebitda/adjusted profit after tax at Rs 636.8/63.2/36.2 billion, a beat/(miss) of +0.5/-2.2/+4.3%, aided by lower finance cost and marginally higher treasury income. Plant and machinery margins stood at 7.6% (+flat YoY).

L&T continues to guide for 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%.

Net working capital to sales stood at 10.1% (Q4 FY25: 11%) and L&T maintained FY26 guidance at 12%. Adjusted for delay in water payments, Q1 FY26 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 (Q1 FY26 - 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.

1. Given- the record-high order book of Rs 6.1 trillion,

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 SOTPbased target price of Rs 4,287 per share (29x Mar-27E EPS).

Marginal increase in target price owing to upward calibration of subsidiary valuations.

Asian Paints - Growth pangs persist

Asian Paints Ltd.'s consolidated revenue declined 0.3% YoY to Rs 89.4 billion (our estimate: Rs 90.2 billion). Decorative clocked 3.9/-1.2% volume/value growth and Industrial business grew 8.8% in Q1. Q1 decorative volumes were impacted primarily by the early onset of monsoon and an unfavorable product mix, though early signs of recovery are visible in urban demand. International business grew 8.4% YoY.

Gross margin improved 15bps YoY to 42.7% (our estimate: 43.3%), supported by ~1% material cost deflation. However, Ebitdam contracted 70bps to 18.2% (our estimate: 19%), mainly due to higher marketing expenses to defend market share.

We've marginally cut our FY26/27 EPS estimates by 2% each to account for higher marketing costs but maintain our Add rating with a DCF-based target price of Rs 2,500/share; implying 47x Jun-27 P/E.

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