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Goldman Sachs Upgrades Larsen & Toubro, Sets Ambitious Price Target
New Delhi – Leading brokerage firm Goldman Sachs has significantly boosted its outlook on Larsen & Toubro Ltd. (L&T), upgrading the Indian infrastructure giant's stock rating to "buy" from its previous "neutral" recommendation. The firm also raised its price target substantially, projecting a potential 25% upside for the stock.
This optimistic revision, announced on Friday, December 12, underscores Goldman Sachs' confidence in L&T's future growth trajectory. The new price target is set at ₹5,000, a considerable increase from the prior ₹3,730. This target is among the highest on the street, closely following ICICI Direct's ₹5,020.
Key Growth Drivers Identified
Goldman Sachs highlighted several key sectors where it expects Larsen & Toubro to capitalize on significant growth opportunities. The brokerage specifically pointed to the defence, green hydrogen, and nuclear power markets as areas poised for expansion and strong contribution to L&T's business.
The firm anticipates a substantial expansion in L&T's Total Addressable Market (TAM). By financial year 2035, Goldman Sachs projects L&T's TAM to grow from ₹1.4 lakh crore in financial year 2026 to an impressive ₹3.4 lakh crore. This massive increase signals ample room for L&T to scale its operations and revenue.
Bullish on Capex and Orders
A strong order backlog provides a solid foundation for Larsen & Toubro's future performance. Coupled with increased confidence in the domestic capital expenditure (capex) recovery, these factors contribute to Goldman Sachs' bullish stance on the stock. The Indian economy's focus on infrastructure development bodes well for L&T's core business.
Goldman Sachs forecasts robust financial performance for L&T over the next five years. The brokerage expects revenues to grow at a Compounded Annual Growth Rate (CAGR) in the low-double-digits. Profitability is projected to see even stronger growth, with profits anticipated to grow at a mid-teen CAGR during the same period.
Market Consensus and Performance
Currently, Larsen & Toubro is covered by 33 analysts. The overwhelming majority, 28 analysts, recommend a "buy" rating. Three analysts suggest holding the stock, while two advise selling. The consensus price target across these analysts implies an average potential upside of 12.2% from current trading levels.
L&T's shares closed 0.3% higher on Thursday at ₹4,003. The stock has already shown positive momentum, gaining 9% year-to-date in 2025, reflecting investor interest and positive market sentiment.
Impact
The upgrade by Goldman Sachs could further fuel investor interest in Larsen & Toubro, potentially driving its stock price closer to the newly set target. This positive sentiment might also reflect favorably on other companies within India's infrastructure and industrial sectors. Investors are likely to watch L&T's progress in defence, green hydrogen, and nuclear power closely, as these are identified as key growth engines.
Impact rating: 8/10
Difficult Terms Explained
- Compounded Annual Growth Rate (CAGR): A measure of the average annual growth of an investment over a specified period longer than one year.
- Total Addressable Market (TAM): Represents the total revenue opportunity available for a product or service.
- Capital Expenditure (Capex): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, technology, or equipment.
- Brokerage Firm: A company that facilitates the buying and selling of financial securities between a buyer and a seller.
- Price Target: The price level at which a stock analyst believes a stock will trade in the future, usually within a 12-month period.