L&T's growth story intact, say analysts after Q2 show; buy, sell, or hold?

Nuvama Institutional Equities and Motilal Oswal Financial Services (MOFSL) have retained their Buy ratings on L&T, signaling confidence in the company's medium-term growth prospects.

Engineering and construction major Larsen & Toubro (L&T) is riding on a healthy order book and a robust project pipeline, keeping analysts upbeat even as quarterly results showed some execution hiccups. Nuvama Institutional Equities, Motilal Oswal Financial Services (MOFSL) and Emkay have retained their Buy ratings on L&T stock, signaling confidence in the company’s medium-term growth prospects.

Nuvama sees strong growth prospects

Subhadip Mitra, Srishti Gandhi, Vikram Datwani, and Divyam Sureka—research analysts at Nuvama—said they remain optimistic on L&T, citing a consolidated order book at 3.6x FY25 sales (₹6.67 trillion) and a ₹10.4 trillion pipeline for H2FY26, up 29 per cent Y-o-Y, largely driven by infra and hydrocarbon projects. They have also revised FY27E/28E EPS estimates up by 0.4 per cent and 3 per cent, respectively, and raised the target price to ₹4,680 from ₹4,200, valuing the core business at 25x FY28E EPS. The revised target implies an upside of nearly 18.43 per cent from the stock’s last traded price of ₹3,955 on the BSE on October 29, 2025.

 

During Q2FY26, L&T reported a 15.6 per cent Y-o-Y rise in net profit to ₹3,926 crore, led by higher revenue. Revenue from operations rose 10.4 per cent to ₹67,984 crore but fell short of street estimates by 4 per cent, Nuvama noted, due to extended monsoon-related execution delays. Other income jumped 25.7 per cent to ₹1,384.28 crore. Ebitda stood at ₹6,806 crore, up 7 per cent Y-o-Y, with the Ebitda margin at 10 per cent, compared with 10.3 per cent in the same quarter last year. The consolidated order book reached ₹6.67 trillion by end-September 2025, up 30.7 per cent Y-o-Y, with international orders accounting for about 49 per cent of the total.

 

Nuvama analysts said core operating margins have bottomed out at around 8.2 per cent and are expected to remain in the 8.3–8.5 per cent range alongside 15 per cent sales growth through FY27/28E, as more projects reach margin milestones. Management reiterated FY26 guidance of 15 per cent revenue growth and 8.5 per cent core operating margins, highlighting that other income growth is likely to exceed the 10 per cent target, with H1 inflows up 48 per cent Y-o-Y and an additional $4.5 billion under L1.

 

“H2FY26 is likely to be execution-heavy after a weak H1, affected by heavy monsoons. With conversion of Middle East L1 orders ($4.5 billion) and a normal H2 inflow run-rate, we expect FY26 other income to register 12–15 per cent growth,” the analysts said.  ALSO READ | APL Apollo fires on all cylinders; what's next for the stock? Find out here

MOFSL maintains confidence in L&T growth

MOFSL analysts have also retained a Buy rating on L&T shares with a revised target of ₹4,500, up from ₹4,300, reflecting revised valuations of subsidiaries.

 

According to MOFSL, the stock is trading at 30x/25x/21x P/E on FY26/27/28E earnings for the core E&C business. “We tweak our estimates to factor in 1H performance for the core business as well as the IT subsidiaries. We now expect core E&C revenue/Ebitda/PAT to grow at a CAGR of 16 per cent/18 per cent/22 per cent,” the brokerage said.

 

MOFSL valued L&T’s core business at 28x P/E two-year forward earnings, applying a 25 per cent holding company discount for subsidiaries.

 

The brokerage, however, cautioned that slower order inflows, delays in completing mega and ultra-mega projects, a sharp rise in commodity prices, increased working capital, and heightened competition could pose downside risks to their estimates.

Emkay raises target on strong order inflows and visibility

Emkay Global has reiterated its 'Buy' rating on Larsen & Toubro (L&T) while raising its sum-of-the-parts (SoTP)-based target price by 10 per cent to ₹4,400, implying an upside potential of around 11 per cent.

 

The brokerage noted that L&T sustained its strong order inflow momentum, with core order inflows rising 54 per cent Y-o-Y in Q2FY26 and 48 per cent Y-o-Y in 1HFY26, underscoring its diversified engineering and manufacturing capabilities, wide geographic reach, and varied customer base.

 

For Q2FY26, consolidated revenue grew 10 per cent Y-o-Y to ₹68,000 crore, while Ebitda rose 7 per cent Y-o-Y to ₹6,800 crore, broadly in line with estimates. The Ebitda margin stood at 10 per cent, down 30bps Y-o-Y, though the core margin improved 20bps Y-o-Y to 7.8 per cent. PAT came in at ₹3,900 crore, supported by higher other income and strong cash flow generation (up ₹4,800 crore during the quarter), driving RoE to 17.2 per cent, up 100bps Y-o-Y.

 

Management highlighted a robust prospect pipeline of ₹10.4 trillion for 2HFY26 (vs ₹8.1 trillion in 2HFY25), providing strong order inflow visibility ahead. However, Emkay cautioned that geopolitical tensions could delay execution and order conversion in the near term.

 

With strong 1HFY26 inflows, L&T is on track to comfortably achieve its 10 per cent order inflow guidance for FY26. Management remains confident of 15 per cent revenue growth and 8.3-8.5 per cent Ebitda margin in the Projects & Manufacturing segment for FY26.

 

Factoring in the robust outlook, Emkay has raised its FY27E/28E EPS estimates by 6-7 per cent and rolled forward valuations to Sep-27E, valuing the core business at 27x earnings.