Larsen & Toubro's order book has reached a record ₹8.5 trillion, providing strong revenue visibility. ICICI Securities has raised its price target on the stock, citing improved project execution and better cash flow management.
Larsen & Toubro (L&T) has reached a major milestone with its order book growing to a record ₹8.5 trillion. This massive backlog is now roughly 4.1 times the company's sales from the last twelve months, which provides a clear view of its potential revenue for the coming quarters. Following these updates, ICICI Securities has increased its price target for L&T shares to ₹4,450 from the previous target of ₹4,040.
The engineering and construction major reported a 24% year-on-year increase in new orders during the first half of the current fiscal year. Despite the complexities of managing large-scale infrastructure projects and navigating global supply chain constraints, the company has managed to maintain a steady speed in project execution. The company is now eyeing a robust pipeline of potential orders estimated at ₹10 trillion, and the management remains confident in achieving 10-12% growth in total order intake for the full year.
A key highlight of the recent performance is the improvement in financial efficiency. L&T has successfully reduced its net working capital to sales ratio to 1.7%, a notable improvement from the 4.1% reported in fiscal year 2026. This reduction suggests that the company is getting better at collecting payments and managing advances on its contracts, which helps to free up cash.
In terms of profitability, the company’s core operating margins were 7.2% during the first half of the year. These margins have faced pressure due to the rising costs of raw materials and other inputs. However, the management expects these margins to trend toward 7.8% in the second half of the fiscal year.
For investors, it is important to recognize that while the order book is at a record high, the infrastructure sector is cyclical and faces its own set of challenges. Execution risk remains a major factor to monitor, as any significant delay in large projects or unexpected spikes in project costs could impact profitability. Additionally, the company's heavy reliance on international projects means that geopolitical factors and currency fluctuations can also play a role. Moving forward, the most important updates to follow will be the actual pace of project execution, whether the company achieves its margin guidance of 7.8% in the second half, and how efficiently it continues to manage its working capital.