L&T Posts Strong Q2 FY26 Results with Robust Order Growth; Eyes Tech Expansion Amidst Fair Valuation

Larsen & Toubro (L&T) has demonstrated robust performance in its Q2 FY26 results, posting a 10% year-on-year revenue growth. This growth was primarily propelled by its energy projects segment, which saw a significant 48% YoY increase due to international project ramp-ups, and its IT & IT Technology Services, which maintained double-digit growth. The core infrastructure business experienced flat revenues, attributed to project execution phases, extended monsoons, and slower progress on water projects.

EBITDA margins remained stable year-on-year. While infrastructure segment margins saw a slight improvement due to better execution, energy project margins were impacted by cost overruns. Profitability was further bolstered by a 16% earnings growth, aided by reduced interest expenses and depreciation.

The company's order book strength is noteworthy, with order inflows accelerating by 45% YoY to Rs 1,15,800 crore in Q2, bringing the total inflow for the year to Rs 2 lakh crore, exceeding the initial guidance. The prospect pipeline stands at Rs 10 lakh crore, split equally between domestic and international markets, with significant contributions expected from infrastructure and energy sectors. L&T anticipates securing further orders, particularly in the Middle East and West Asia.

Looking ahead, L&T has maintained its FY26 revenue growth guidance of 15% and core business EBIT margin of 8.5%. A key strategic move is the planned entry into Electronic Manufacturing Services (EMS) in specific areas where it has expertise. This initiative aims to diversify revenue streams, strengthen its supply chain, and enhance competitiveness. The company also continues to focus on working capital reduction, leading to an improved RoE of 17.2% as of September 2025.

Impact: This news has a significant positive impact on the Indian stock market, particularly for large-cap infrastructure and conglomerate stocks. L&T's strong performance, robust order book, and strategic diversification plans signal continued growth and stability, which can boost investor confidence in the sector. The entry into EMS also highlights L&T's adaptability and forward-looking strategy, potentially creating new growth avenues. The current valuation, however, suggests that immediate, substantial stock price appreciation might be limited, requiring investors to have moderate to low expectations in the near term, while long-term prospects remain strong. Rating: 8/10

Difficult Terms Explained: * EBITDA (Earnings before interest, taxes, depreciation and amortisation): A measure of a company's operating performance, excluding financing decisions, accounting decisions, and tax environments. * RoE (Return on Equity): A profitability ratio that measures how effectively a company uses shareholder investments to generate profits. * Capex (Capital Expenditure): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment. * Order Book: A record of orders received by a company for goods or services that have not yet been fulfilled. A strong order book indicates future revenue visibility. * Prospect Pipeline: A list of potential future projects or business opportunities that a company is pursuing. * L1 bidder (Lowest Cost Bidder): The bidder who has submitted the lowest price in a tender process for a contract. * EBIT margin (Earnings Before Interest and Taxes margin): A profitability ratio that indicates the percentage of revenue remaining after deducting operating expenses (excluding interest and taxes). * TTM ROE (Trailing Twelve Months Return on Equity): The Return on Equity calculated over the past twelve months, providing a recent snapshot of profitability. * SOTP valuation (Sum-of-the-Parts valuation): A method of valuing a company by adding up the estimated values of its individual business units or assets.