L&T Q2 Results Review: Strong International Orders, Revenue Growth Offset Margin Pressures

Larsen & Toubro Ltd.'s September quarter results showed steady order flows and revenue growth, although the company faced some margin contraction due to a higher base and mixed domestic performance.

Across brokerages, a common theme was that the company's robust execution in international markets, particularly in the Middle East, is balancing domestic challenges. This strategic edge, coupled with management's consistent order flow guidance, provides optimism for sustained growth.

L&T reported a 20% YoY rise in revenue to Rs 61,554 crore in the second quarter of fiscal 2025, aligning with market expectations. Operating profit rose 13% to Rs 6,632 crore, while the Ebitda margin contracted slightly, down 70 basis points to 10.33%. Net profit rose 7% to Rs 4,113 crore.

These results reflect L&T's ability to manage cost pressures, while achieving solid order execution internationally, according to analysts.

Here is a look at what they said.

Jefferies

• Has a 'buy' rating on the stock, with a target price of Rs 4,160 per share, implying a potential upside of 23%.  

• Noted the steady progress in L&T's engineering and construction margins.

• International execution rose 84% YoY, while domestic order flow remained modest. 

• Revenue and Ebitda aligned with expectations, driven by a strong international segment.

• L&T's order book reached Rs 5.1 trillion, supported by healthy prospects in the Middle East.

• Despite a high base effect, L&T's 10% order flow growth guidance remains intact, with new tenders anticipated in thermal power.

Nomura

• Nomura has a 'buy' rating on the stock with a target price of Rs 4,100 apiece, with a potential upside of 20.3%.

• The brokerage focused on L&T's favourable risk-reward profile, noting its solid international order inflows and a manageable domestic pipeline. 

• L&T's 800 billion order inflow surpassed estimates, driven by renewables and international T&D projects.

• International orders represented 63% of inflow, bolstered by robust demand in the Middle East.

• Despite muted government capex in the first half of the fiscal, L&T's disciplined capital management and cash flow generation underpin growth potential.

Bernstein

• The brokerage has an 'outperform' rating on the stock with a target price of Rs 3,891 per share.

• Bernstein noted L&T's resilience in managing working capital and execution amid global uncertainties.  

• L&T's international revenues outpaced domestic, showcasing its strategic positioning.

• Management reiterated 10% YoY order inflow guidance, despite a high base last year.

• Improved core margins, supported by softening commodity prices, provide an upside potential for the full year.

Emkay

• Has a 'buy' rating on the stock, with a target price of Rs 4,300 per share, implying a 26.2% upside. 

• Reiterated its positive stance on L&T, driven by an upward revision in its fiscal 2026/27 estimated earnings forecast. 

• Second quarter performance exceeded expectations, led by international execution, especially in hydrocarbon and precision engineering.

• The guidance for the current fiscal's revenue is likely conservative, given L&T's strong order book and the recovery in domestic markets.

• Core order inflow growth of 77% YoY reflects L&T's strength in capitalising on international demand.

Nuvama

• Has a 'buy' rating on the stock with a target price of Rs 4,000 per share. 

• L&T's second quarter results exceeded street estimates, driven by a 4%/6% beat in Ebitda/PAT.

• Robust execution (+21% YoY) and core operating margins at 7.6% (+20bps YoY) suggest margins may have bottomed out.  

• Despite a 10.2% YoY decline in order inflows due to a high base effect from last year's hydrocarbon orders, L&T retained its 10% YoY growth guidance for order inflows, signalling a stronger second half for the fiscal.  

• Order backlog at a record high of Rs 5 trillion-plus offers solid revenue visibility at 2.3 times fiscal 2024 sales.