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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:
strong order book sustaining healthy revenue growth,
an expected revival of domestic order inflows after state elections,
bottoming-out of margins,
fairly stable working capital, and
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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