L&T back on investor radar amid strong order book, hopes of margin improvement

Larsen and Toubro’s (L&T) stock has risen by 8% in three trading sessions after the engineering major reported highest-ever annual order inflow for FY25 despite global macroeconomic volatility. The company has increased the overseas footprint gradually over the past three years with order inflow from other countries now forming more than half of its total orders. While this may be margin dilutive due to the fixed price nature of international orders, the company expects to clock 8.5% EBITDA margin for FY26 in its core engineering segment compared with 6.4% in FY25, assuming stable commodity prices. Analysts have retained ‘Buy’ rating on the stock with an upside of 10-18% to the current market price of Rs3,586.6.

For the March quarter, order inflow increased by 24% year-on-year to Rs89,613 crore with 70% contribution from international markets. L&T’s consolidated order book as of March 31, 2025, surged 22% year-on-year to Rs5.8 lakh crore; international projects contributed 46%. The company’s management indicated a substantial 57% increase in the prospective pipeline to Rs19 lakh crore for FY26. Factoring in a conservative outlook due to global uncertainties, the management has given order inflow guidance of 10%, with potential revision after the initial six months.

L&T’s consolidated revenue rose by 11% year-on-year to Rs74,392 crore in the March quarter while net profit grew by 23% to Rs6,133 crore. The operating margin before depreciation and interest (EBITDA margin) expanded by 20 basis points to 11%. For FY25, the company’s revenue and net profit grew by 16% and 14% to Rs2,55,734 crore and Rs17,687 crore, respectively.

Infrastructure projects constituted more than half of the total revenue, rising just 3% year-on-year, primarily due to faster execution in the previous quarters. Energy and IT contributed 16-17% to total revenue, jumping 49% and 12%, on a year-on-year basis, respectively. Energy segment received an ultra-mega offshore order from Qatar Energy which boosted Hydrocarbon order book.

“Infrastructure contributes Rs9.6 trillion to the pipeline in FY26 as against Rs7.3 trillion in FY25, aided by segments such as heavy civil infrastructure, transportation, renewables, power transmission and distribution, buildings and factories, water, and minerals and metals,” noted Motilal Oswal Financial Services (MOFSL) in a report.

The company has given group revenue guidance of 15% while the core engineering and construction (E&C) margin is targeted to be at 8.5%, a tad higher than the previous year’s guidance of 8.25%.“Due to the increasing size and complexity of the projects, the management has shown its interest in collaboration in a consortium or joint venture, with competitors for large contracts typically exceeding $5 billion,” mentioned Emkay Research in a report.Motilal Oswal has maintained ‘BUY’ while reducing the target price to Rs3,950 from Rs4,100 owing to reduction in estimates for IT subsidiaries. Emkay Research has lowered earnings expectations by 7-8% for FY26-27, by building in lower EBITDA margin due to lower near-term profitability in the hydrocarbon business and increased fixed-price order backlog to 46% from 42%. It reiterated ‘BUY’ while cutting the target price by 12.1% to Rs4,000.