L&T Shrugs Off Geopolitical Heat: CLSA, Jefferies, Citi See Multi-Year Upside From $78B Order Book

Shares of engineering and construction conglomerate Larsen & Toubro (L&T) are drawing strong bullish sentiment from top global brokerages following a resilient first-quarter performance. Citi, Jefferies, and CLSA have all maintained positive ratings on the stock, citing robust order books, manageable cost pressures, and a status as a premier global capital expenditure play.

Resilient Q1 Margins and Maintained Guidance

Despite a slight miss on revenue, L&T's operational margins have remained largely intact. According to Citi, the company delivered a resilient Q1 performance with a constructive outlook on order inflows. While the engineering giant did face some margin headwinds during the quarter-primarily driven by a bump in Expected Credit Loss (ECL)-management commentary suggests that supply chain-linked cost pressures should remain highly manageable.

Crucially, L&T has maintained its full-year margin and annual 10-12% year-on-year revenue guidance. Jefferies noted that keeping this annual guidance intact strongly implies that the second half of the financial year (H2) will see accelerated growth and stronger overall performance.

A Global Capex Play with a Massive Backlog

A major highlight for the quarter was L&T's robust order execution and inflows. CLSA highlighted a "Q1 order surprise," driven by an expanding total addressable market that now reaches into Europe, running parallel to sustained industrial capital expenditure drives within India.

CLSA analysts noted that L&T is rapidly emerging as a "global Capex cycle play." This is supported by a massive $78 billion order backlog-up 28% year-on-year-which appears remarkably solid even in the current macroeconomic environment.

Geopolitical Headwinds Seen as a Buying Opportunity

While global geopolitical tensions have weighed on the broader markets, brokerages see this as an entry point for L&T. Both CLSA and Jefferies view the recent stock weakness, which stems from cyclical factors and Middle Eastern tensions such as the Iran conflict, as a compelling buying opportunity.

CLSA went as far as to label L&T the "most undervalued large-cap India industrials stock." Meanwhile, Jefferies believes that if global tensions ease, the stock should see a swift leg up to the Rs 4,278 level (where it traded when the conflict escalated). Beyond that recovery point, Jefferies notes that clear earnings visibility will add further upside to the stock.

Brokerage Targets at a Glance:

Jefferies: Maintained a 'Buy' rating and hiked its target price to Rs 5,000 (up from Rs 4,885), the highest among its peers.

CLSA: Maintained an 'Outperform' rating with a target price of Rs 4,842.

Citi: Maintained a 'Buy' rating with a target price of Rs 4,650.

Overall, the street remains highly constructive on L&T's long-term growth trajectory, confident that the company's commanding backlog and execution capabilities will comfortably steer it through near-term global uncertainties.

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