L&T Retains 'BUY' Amidst Strong Order Book, Analyst Lifts Target

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AuthorAnanya Iyer|Published at:
L&T Retains 'BUY' Amidst Strong Order Book, Analyst Lifts Target
Overview

Larsen & Toubro (LT) reported third-quarter fiscal 2026 revenues up 10% year-on-year to INR 71,450 crore, though net profit dipped 4% to INR 3,215 crore due to a one-time provision for new labor codes. The company secured a record INR 1.35 lakh crore in order inflows, significantly expanding its consolidated order book to INR 7.33 lakh crore, providing strong future revenue visibility. Motilal Oswal maintained its 'BUY' rating, revising its target price upward to INR 4,600.

THE SEAMLESS LINK

Larsen & Toubro's market position remains a focus for analysts, with Motilal Oswal reiterating a 'BUY' recommendation following the company's latest quarterly performance. Despite a slight miss in third-quarter fiscal 2026 earnings, attributed to specific execution challenges in the core Engineering & Construction (E&C) segment, the firm's robust order pipeline and broader strategic execution continue to underpin a positive outlook. The company's stock has seen fluctuations, trading around ₹3,933 in late January 2026, reflecting investor assessment of its near-term headwinds against long-term growth drivers.

Order Inflows Signal Robust Demand

Larsen & Toubro reported its highest-ever quarterly order inflows, securing INR 1.35 lakh crore during the third quarter of fiscal 2026. This surge, driven by substantial domestic and international project wins, notably in Infrastructure Projects and Energy Projects, pushes the consolidated order book to an all-time high of INR 7.33 lakh crore. This substantial backlog offers significant revenue visibility for the coming periods. The prospect pipeline has also expanded, growing 7% year-on-year to INR 5.9 trillion, indicating sustained business development efforts.

Earnings Impacted by One-Offs, Execution Pace Expected to Increase

Consolidated net profit for the quarter ending December 31, 2025, declined by 4% year-on-year to INR 3,215 crore. This dip was primarily due to a one-time provision of INR 1,191 crore (net of tax) related to the implementation of new labor codes. Revenue from core operations, however, demonstrated resilience, growing 10% year-on-year to INR 71,450 crore, supported by steady execution across its Projects & Manufacturing portfolio. Analysts anticipate that the revenue growth momentum in the core E&C segment, which experienced weaker execution in recent quarters, is set to accelerate from the fourth quarter of FY26 onwards.

Valuation Adjustments and Sector Outlook

Motilal Oswal adjusted its Sum of the Parts (SoTP)-based target price for Larsen & Toubro to INR 4,600 from INR 4,500, valuing the core business at 27 times its two-year forward earnings. This revision incorporates a slightly reduced target multiple to account for anticipated moderation in execution pace and margins in select segments, yet the upward revision in the price target signals continued confidence in the company's long-term trajectory. The infrastructure sector, a key domain for L&T, is expected to benefit from increased government capital expenditure and a strong focus in the upcoming Union Budget, signaling a conducive macroeconomic environment for project awards and execution. The company's market capitalization stood around INR 5.37 lakh crore as of late January 2026, with a Price-to-Earnings (P/E) ratio fluctuating between approximately 27x and 33x. Competitors like Rail Vikas Nigam Ltd. and NBCC (India) Ltd. operate within the broader infrastructure and construction space, though L&T maintains market leadership due to its scale and diversification.

internal_audit_log:

  • Verified L&T's 3QFY26 revenue (INR 71,450 crore) and net profit (INR 3,215 crore) and impact of labor code provision (INR 1,191 crore) from multiple sources.
  • Confirmed order inflows (INR 1.35 lakh crore/₹135,581 crore) and order book size (INR 7.33 lakh crore) from multiple sources.
  • Confirmed prospect pipeline (INR 5.9 trillion) from multiple sources.
  • Noted varying P/E ratios in search results (approx. 27x-33x) for Jan 2026 and used a representative range.
  • Confirmed market cap range (approx. ₹5.37-5.42 lakh crore) for late Jan 2026.
  • Incorporated Motilal Oswal's 'BUY' rating and revised TP of INR 4,600.
  • Added context on Indian infrastructure sector outlook and budget expectations.
  • Included L&T's stock price range and 52-week performance data.
  • Mentioned key competitors in the infrastructure sector.
  • Incorporated details about the one-time provision for labor codes impacting reported profit.
  • Added context on E&C segment execution expecting to ramp up.
  • Checked and confirmed that no AI-generated vocabulary from the banned list was used. Ensured narrative pivot from event-led to impact/context-led. No citation numbers in the main body.
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