L&T Q4 Review: 2026 Vision Needs Infra Momentum, Efficient Capital Allocation, Say Analysts
Analysts reiterated their ‘buy’ ratings on Larsen & Toubro Ltd. after the fourth quarter citing a pickup in order inflows amid the government’s emphasis on increased domestic manufacturing and infrastructure push.
India’s largest engineering-to-construction company saw its revenue increase 9.9% year-on-year in the three months ended March, in line with the Bloomberg consensus analyst estimates.
L&T’s order flow stood at Rs 73,941 crore in the fourth quarter compared with Rs 50,359 crore in the preceding three months, led by the infrastructure and hydrocarbon segments.
Its total order book grew 10% over the year earlier to Rs 1.92 lakh crore. The cumulative order inflow for the full fiscal ended March 2022 stood at Rs 3,57,595 crore. International orders stood at Rs 32,241 crore during the quarter, representing 44% of the total order flows.
The company’s margin, however, contracted during the period.
“The margin for the quarter and year shows signs of inflation, supply-side constraints,” said Shankar Raman, chief financial officer at L&T. “The commodities have become expensive and sourcing had to be changed on the go due to sanctions.”
While the analysts acknowledged the margin pressure, they remained optimistic.
Of the 41 analysts tracking L&T, 39 recommend a ‘buy’ rating, one each suggests a ‘hold’ and a ‘sell’, according to Bloomberg data. The consensus 12-month price target is Rs 2,152.38 apiece, implying a potential upside of 41% from the current market price.
Here’s what analysts have to say about L&T’s Q4 FY22 results.
FY22 core performance reflects stable results amid challenging macros.
Consolidated results fared in line with consensus.
Consolidated Ebitda margin fared lower in Q4, it is broadly stable for FY22 at 9.5% (down 100bp YoY) for core E&C and 9.2% for infra (down 30bp YoY).
FY23 order inflow and revenue guidance of 12–15% is achievable, unless domestic awards slow down in a big way.
Domestic award to tender ratio at 50% for FY22 versus 71% in FY21.
L&T’s 14% to 15% orders and revenue CAGR (FY21–26E) target with a healthy 18% return corridor would require both domestic infra momentum and efficient capital allocation (including non-core exits as planned).
And while simplification of segments (energy and high-tech) is a welcome step, significant capital commitment towards new energy/infra (electrolysers, battery, etc.) and services consolidation remain the key variables for investors.
Maintains ‘buy’ with a target price of Rs 2,160 apiece by March 2023.
L&T (ex-services) reported 55% YoY order inflow growth for the quarter, leading to about 9% growth for FY22, largely on the back of orders in the infrastructure, hydrocarbon and defence segments.
The share of international orders has increased to 44% for the year from 27% last year. The order book stands at Rs 3.6 lakh crore, up 9% YoY.
The company (ex-services) saw 10% YoY revenue growth in Q4, with Ebitdam of 10.2% vs 12.7% Q4 FY21.
The infrastructure segment reported an Ebitdam of 9.2% vs 11.5% a year earlier.
For FY22, L&T (ex-services) posted an Ebitdam of 9.2% vs 10.1% in FY21.
L&T has guided for 12-15% growth in revenue and order inflows for FY23, with the project segment’s margin expected at 9.5%.
The strong order book and the government’s emphasis on increased local manufacturing bode well for the company.
HDFC Securities Institutional Equities
Maintains ‘buy’ on L&T but reduces the SOTP price target to Rs 2,296 apiece, given strong headwinds of cost inflation and its subsequent impact on the margin.
L&T’s Q4 FY22 revenue/Ebitda/PAT missed estimates by 3/12/13%.
Execution normalised during the quarter. However, domestic tendering activity was brisk with order-to-tender ratio at 51% for FY22 (vs 70% in FY21).
Ebitda margin, at 12.3%, was down 95bps YoY, affected by cost inflation and delay in claim certification in project and manufacturing business.
L&T secured a soft loan of Rs 3,000 crore from the Telangana government and is in talks to bring an equity partner to hold a 51% stake in Hyderabad metro project.
Along with this de-risking, it expects to offload IDPL and Nabha Power project from its balance sheet.
L&T unveiled its Lakshay 2026 strategic plan, wherein it is targeting Rs 3.4 lakh crore of order inflow in FY26 with a revenue of Rs 2.7 lakh crore and RoE of more than 18%.