L&T Q2 Results Review: Motilal Oswal Sees 20% Upside As Earnings Beat Expectations; Check Target Price

L&T's Q2 FY27 results on consolidated and core engineering, procurement and construction segment were ahead of the brokerage's estimates on better-than expected execution, higher other income and lower tax rate despite weakness seen at margin level. Outperformance was seen across- core E&C order inflows (up 32% YoY).

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Motilal Oswal Report

Following Larsen and Toubro Ltd.'s better-than expected Q2 results, Motilal Oswal has maintained its Buy with an unchanged SoTP-based target price of Rs 4,400, valuing core business at 25 times Dec'28 estimates.

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L&T's Q2 FY27 results on consolidated and core engineering, procurement and construction segment were ahead of the brokerage's estimates on better-than expected execution, higher other income and lower tax rate despite weakness seen at margin level.

1. Outperformance was seen across- Core E&C order inflows (up 32% YoY),
2. core E&C revenue growth (up 20% YoY) with healthy execution seen across both domestic and international revenues,
3. sharp improvement in net working capital to 1.7% of sales, and
4. RoE of 16.7%.

Margin weakness was offset by higher other income on higher surplus funds and improved yields.

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With a prospect pipeline of Rs 10 trillion, L&T's historical win rate of >20% and H1 FY27 inflows at Rs 2.1 trillion, the brokerage believes that L&T is rightly positioned to meet its inflow target of Rs 3.9-4 trillion for FY27.

Despite supply chain challenges, execution growth has ramped up sharply for the company, thereby giving confidence on revenue growth going ahead.

Motilal Oswal has revised its estimates to bake in higher other income and slightly lower margin and expect L&T's core EPC revenue/Ebitda/PAT to grow at 14%/15%/20% CAGR over FY26- 29.

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