Emkay Global has initiated coverage on Larsen & Toubro with a target price of Rs 4,450, driven by a record Rs 8.5 trillion order book. While the company projects 10-12% growth, investors are keeping an eye on profit margin pressure and geopolitical risks linked to its significant Middle East exposure.
Emkay Global Financial has initiated coverage on engineering and construction major Larsen & Toubro (L&T) with a "Buy" rating and a target price of Rs 4,450 per share. This move highlights the company's massive project pipeline and strong order inflows, even as it manages headwinds related to profit margins and international market stability.
The brokerage points to L&T's record order backlog of Rs 8.5 trillion, which expanded by 28% year-over-year. A significant part of this momentum came from the Projects, Products, and Manufacturing (PP&M) segment, which reported a 20.2% jump in execution during the second quarter of fiscal 2027. This deep order book provides the company with substantial revenue visibility for the coming years, positioning it well within the domestic infrastructure sector.
However, the company’s financial performance shows some friction. While top-line growth remains solid, profit margins have faced pressure, with EBITDA growth recorded at a modest 1% in the recent quarter. This was largely due to an adverse revenue mix and rising operational costs. Investors are also watching the company's international business closely. The Middle East currently accounts for 40% of the firm's total order book. While this region has historically been a strong source of revenue, it also introduces risks associated with geopolitical instability, which could affect project timelines, material supply, or overall execution costs.
Management remains optimistic, forecasting 10-12% revenue growth for fiscal 2027, backed by domestic infrastructure spending and an increasing shift toward clean energy projects. Emkay’s valuation is based on a "sum-of-the-parts" approach—a method that values the company's different business units individually—projected through the first half of fiscal 2029.
For shareholders, the primary monitorables remain the pace of project execution and the company's ability to protect its margins despite cost pressures. Maintaining a balance between executing its large backlog and navigating geopolitical developments in its key international markets will be critical for the company’s performance in the coming quarters.