Target: ₹4,550
CMP: ₹
Larsen & Toubro by virtue of its leadership and diversified offerings in the EPC domain would be a key beneficiary of the government’s infrastructure thrust and capex revival in private sectors. Further, increased investments in infrastructure, and hydrocarbon in GCC region provide diverse opportunities.
Given a strong order book at about ₹5.1 lakh crore and order prospects of ₹8.04 lakh crore, we expect robust execution going forward. Multiple margin tailwinds – easing supply chain, stable commodity prices, and higher margin orders indicate margin recovery from FY2025.
Focus on sunrise sectors such as green hydrogen, data centres, e-commerce as well as defence would lead to further diversification. We maintain Buy on L&T with a PT of ₹4,550, given strong execution and margin tailwinds and improving return ratios in the capex upcycle.
Order prospects in the domestic and international markets remain healthy at ₹8.07 lakh crore. Domestic orders are expected to see pick-up in H2FY2025. L&T remains at the forefront to reap benefits from the AtmaNirbhar Bharat scheme with its diversified businesses across sectors such as defence, infrastructure, heavy engineering and IT and is the best proxy for domestic capex.
Key Risks: Slowdown in the domestic macroeconomic environment and geopolitical conflicts on the international front can adversely impact its order prospects.
