L&T up 2%, outperforms market; here's why JM Financial sees more upside

In the past one month, L&T has outperformed the market and rallied 5 per cent, as compared to 0.1 per cent rise in the BSE Sensex.

Larsen & Toubro (L&T) share price today

 

Shares of Larsen & Toubro (L&T) gained 2.2 per cent at ₹3,725 on the BSE in Friday’s intra-day trade in an otherwise weak market after the Telangana government agreed to acquire L&T Group stake in Hyderabad Metro Rail Phase 1 project. 

In the past one month, the stock price of the civil construction giant has outperformed the market and rallied 5 per cent. In comparison, the BSE Sensex was up 0.1 per cent. The stock now trades close to its three-month high of ₹3,727 touched on August 12, 2025. Shares of L&T had hit a 52-week high of ₹3,963 on December 10, 2024.

 

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Why has civil construction stock L&T outperformed?

 

The Telangana government and L&T group have reached an in-principle agreement for the state to acquire L&T's stake in the Hyderabad Metro Rail project. The development, which follows a longstanding deadlock over expansion plans, aims to clear the way for the long awaited Phase 2 of the Metro network.

 

This will make L&T balance sheet light as the project has debt to the tune of ₹12,000 crore and was a loss making project. The divestiture will lead to improvement in profitabililty, ICICI Securities said in a note.

 

Meanwhile, on September 24, L&T said it partnered with Bharat Electronics Ltd (BEL) to support the Advanced Medium Combat Aircraft (AMCA) programme - India’s 5th-generation fighter aircraft initiative. 

 

The consortium will jointly respond to the Aeronautical Development Agency’s Expression of Interest (EoI). The partnership combines L&T’s strength in strategic defence and aerospace platforms with BEL’s expertise in defence electronics, building on their prior work in India’s Light Combat Aircraft (LCA) programme. 

 

The L&T-BEL consortium’s participation in the AMCA programme represents a ₹15,000 crore development opportunity and aligns with India’s strategic push to deepen private sector involvement in defence manufacturing, covering end-to-end responsibilities -  design, prototyping, flight testing, certification, and manufacturing - within 8 years. L&T’s proven track record with LCA Tejas and large-scale defence projects strengthens its prospects. Securing the contract could provide multi-decade revenue visibility from production and lifecycle support, boosting its defence order book, ICICI Securities said.

 

JM Financial Institutional Securities sees more upside in L&T

 

Analysts at JM Financial Institutional Securities said they had estimated that L&T can achieve a ROE level of 17.3 per cent in FY26E (1QFY26 was 17.0 per cent) modestly short of the 18 per cent FY26 target set by management. However, with avoidance of losses from Hyderabad Metro and additionally interest income from cash proceeds we estimate that L&T can exceed 18 per cent ROE for FY26. Thus, this exit enables L&T to mostly meet all the targets it had set up for FY26 or Project Lakshya, the brokerage firm said with a ‘buy’ rating on L&T and target price of ₹4,313 per share. 

 

FY25 PBT/PAT loss at the asset was ₹626 crore which included ₹187 crore in real estate monetisation gains. These losses are 3 per cent of L&T consolidated PBT and 4 per cent of L&T consolidated PAT for FY25. Thus, exit from the asset leads to at least 4 per cent EPS accretion in addition to potential interest income on ₹2,000 crore in cash proceeds L&T shall receive for its equity. Hyderabad Metro contributed ₹600 crore in FY25 EBITDA which is 2 per cent of overall consolidated EBITDA of ₹26,400 crore. The majority of the gains are derived from interest expenses avoided of ₹940 crore in FY25, analysts said in the company update.