The company is retaining guidance and its order book and prospects are driven by overseas markets across hydrocarbon, power, and renewables along with government-led spending in domestic infrastructure.
In Q3FY26, the P&M margin improved 60 bps Y-o-Y to 8.1 per cent, while the Services margin rose 110 bps Y-o-Y to 16.5 per cent. Revenue grew by 10.4 per cent to ₹71,500 crore, which was marginally below expectation due to slow movement in water infra projects. The P&M segment's revenue stood at ₹52,300 crore and Services revenue was at ₹19,200 crore. Adjusted PAT (adjusted for provision of ₹1,340 crore for the labour code) was ₹4,560 crore, up 36 per cent Y-o-Y.
Domestic E&C (engineering & construction) segment’s revenue saw a 2.8 per cent Y-o-Y decline, whereas overseas E&C revenue saw 22 per cent Y-o-Y growth. L&T expects P&M margin to improve 20 bps Y-o-Y to 8.5 per cent. Within P&M, infrastructure margin was at 6.1 per cent (up 60 bps Y-o-Y) and hi-tech manufacturing margin was at 18.3 per cent (up 10 bps Y-o-Y) while energy margin declined by 240 bps Y-o-Y to 5.9 per cent. The Q3FY26 order inflow stood at ₹1.36 trillion (up 17 per cent Y-o-Y), supported by good order finalisation in overseas and domestic markets. The ordering pipeline is healthy, with an infrastructure opportunity of ₹4 trillion, hydrocarbon at ₹1.3 trillion, and power and hi-tech at ₹40,000 crore each. The order backlog of ₹7.3 trillion (up 30 per cent Y-o-Y) provides strong revenue visibility at over 3.5x the trailing 12-month (TTM) revenue. The management expects to beat its order inflow growth guidance of 10 per cent for FY26. Domestic and international order inflows increased 28 per cent and 8 per cent Y-o-Y, respectively.
The 9MFY26 working capital cycle stood at 8.2 per cent vs. 12.4 per cent in 9MFY25 and L&T expects the working capital cycle to stay within 10 per cent of sales for FY26 against initial guidance of 12 per cent. The debt for the core business declined by ₹7,900 crore and stood at ₹29,600 crore.
The order book has 55 per cent fixed-price contracts and 45 per cent variable-pricing contracts. L&T has hedged its exposure across currencies and commodities and is currently not impacted by higher commodity prices or currency fluctuations. Margins could rise after 2-3 quarters as legacy low-margin projects are completed.
Management expects substantial improvement in debt as it has reached in-principle understanding for its divestment of the Hyderabad Metro to the Government of Telangana at a mutually agreed value. L&T expects a cash consideration of ₹2,000 crore on transfer of stake to the state government and debt of ₹13,000 crore will be transferred to a special purpose vehicle (SPV) on completion of the deal.
Revenue growth in E&C is expected to ramp up from Q4FY26. Given the comfortable order book, decent margins, good cost controls and working capital management, improving execution is going to be a key monitorable since the revenue visibility is excellent.
The slow water projects and the weak margins in the energy segment are areas of concerns. The energy segment margin was at 5.9 per cent versus 8.3 per cent in Q3FY25. The margin decline was due to cost pressures in onshore hydrocarbon projects, while new projects in the CarbonLite segment are in early stages of execution, and margin recognition has not commenced. The Ebitda margin of “Others” segment margin improved to 32.8 per cent from 27.5 per cent Y-o-Y, driven by the realty segment. The execution for core E&C has been weak for two quarters mainly due to slow domestic water projects, due to large receivables in these projects.
L&T maintained full-year guidance of 15 per cent Y-o-Y for revenue, and 8.5 per cent Ebitda margin implying a big ramp-up in Q4FY26 execution. The stock market remains very positive on the company (stock gained 3.7 per cent to close at ₹3,932.45 on Thursday on the BSE) and analysts’ consensus is also positive. According to Bloomberg, 26 of the 30 analysts polled post Q3 results are bullish, while one is bearish and remaining three are neutral on the stock. Their average one-year target price is ₹4,640.90.
 "Larsen & Toubro")