'Buy' L&T Shares Maintains Motilal Oswal On Above Estimate Q1 Results, Hikes Target Price

Historically, L&T had a hit ratio of 20-25% in the prospect pipeline, and if it maintains this hit rate, L&T could grow its order inflows far more than its FY26 guidance of 10% YoY growth.

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Motilal Oswal Report

Larsen and Toubro Ltd.’s Q1 FY26 revenue/profit after tax came in 3%/8% above our estimates. Results indicate-

1. sharp outperformance on core E&C order inflows at Rs 766 billion (our est. Rs 631 billion), driven by large order wins in Energy and Infrastructure segments in both domestic and international markets,

2. outperformance on execution with 19% YoY growth (our est. 13% growth), primarily driven by ramp-up in international projects,

3. sustainability of net working capital at lower levels of 10.1% of sales and RoE improvement to 17%.

However, Ebitda margin remained flat YoY for core E&C vs our expectation of a gradual improvement. The order prospect pipeline grew 65% YoY to Rs 15 trillion for the next nine months of FY26.

Historically, L&T had a hit ratio of 20-25% in the prospect pipeline, and if it maintains this hit rate, L&T could grow its order inflows far more than its FY26 guidance of 10% YoY growth.

In the GCC region, L&T hopes to scale up in areas like renewable, clean energy and transmission projects and correspondingly scale up the execution of existing projects.

We marginally increase core E&C revenue estimates and arrive at a revised SoTP-based target price of Rs 4,200 (from Rs 4,100 earlier), based on 28 times two-year forward earnings for core business and a 25% holding company discount to subsidiaries.

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