L&T - Looking Into Near-Term And Long-Term: Motilal Oswal

Motilal Oswal Report

Larsen and Toubro Ltd. has underperformed the broader capital goods index for the last six months on concerns related to weaker-than-expected domestic and international ordering.

Despite muted ordering trends in FY25 so far, we see the following positive factors for L&T:

1. strong order book sustaining healthy revenue growth,

2. an expected revival of domestic order inflows after state elections,

3. bottoming-out of margins,

4. fairly stable working capital, and

5. attractive valuations of 23 times FY26E EPS for the core EPC segment.

We do believe that L&T’s near-term performance may be influenced by narratives surrounding state elections and Middle East tensions; however, our long-term thesis on the company stays intact.

We maintain Buy with our SOTP-based target price of Rs 4,250, valuing core business at 30 times two-year earnings and a 25% holding company discount for subsidiaries.

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