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Larsen and Toubro (CMP: ₹3923, MCap: ₹5.39 Trn; Target: ₹5030, Upside: 29%)

ICICIdirect Research 30 Jan 2026 DISCLAIMER

L&T secured robust order inflows (OI) of ₹1,35,581 crore up 17% YoY and up 17% QoQ, led by infra and energy business which formed 46% and 34% of OI. The current order backlog (OB) stands at ₹7,33,161 crore up 30% YoY (49% international). Strong execution in the Energy Projects and Hi-tech manufacturing (revenues up 15% and 34% YoY) led to consolidated revenue growing by 10% YoY to ₹71,450 crore for Q3FY26. Consolidated EBITDA grew 19% YoY to ₹7,417 crore with margins improving 70 bps to 10.4% YoY. Recurring PAT for the quarter increased 31% YoY to ₹4,406 crore, while Reported PAT stood at ₹3,215 crore (down by 4% YoY), impacted by a onetime exceptional provision of ₹1,191 crore related to new labour codes.
Trailing 12-month ROE stood at 16.5% in Q3FY26 vs 16.1% in Q3 FY25, an improvement of 40 bps. Excluding the one-time labor code provision impact of 110 bps, the ROE stood at 17.6%, broadly in line with the company's 18% target for FY26 under the Lakshya plan.
L&T initiated transfer of its realty business to L&T Realty Properties Limited (wholly owned subsidiary) to consolidate all real estate assets into unified platform. The data center business rebranded as Larsen & Toubro Vyoma, planning hyperscale data center expansion across Mumbai, Chennai and Bangalore for high-performance computing and advanced data storage requirements.
For FY26E, the company has guided to exceed its earlier order inflow growth guidance of 10% YoY, while targeting ~15% YoY growth in gross revenue. It expects EBITDA margins of ~8.5% in its Projects and Manufacturing portfolio and a net working capital-to-sales ratio of ~10%.
We expect revenues and PAT to grow at CAGR of 15.6% and 19.9% over FY25-FY28E. and assign BUY rating to L&T valued at SOTP-based target price of ₹5030 and consider as the best capex play in large-cap capital goods space

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