Larsen & Toubro (L&T) stands as a cornerstone in India’s engineering and construction sector, with a significant presence in infrastructure, heavy engineering, defense, and power. As of February 12, 2025, evaluating L&T’s stock involves a comprehensive analysis of both its fundamental and technical aspects to determine its suitability for inclusion in an investment portfolio.
Fundamental Analysis
Recent Financial Performance:
In the third quarter ending December 31, 2024, L&T reported a 14% year-on-year increase in consolidated net profit, reaching ₹33.59 billion. However, this figure fell short of analysts’ expectations of ₹38.31 billion. The company’s revenue grew by 17.3% year-on-year, though it also missed market forecasts. Notably, new orders surged by 53% to a record ₹1.16 trillion, with over half originating from international markets, particularly the Middle East.
In the second quarter ending September 30, 2024, L&T achieved a 5% year-on-year rise in consolidated profit after tax, amounting to ₹33.95 billion. This growth was attributed to accelerated project execution, despite a 10% decline in the order book from the previous year. International revenue saw a significant uptick, contributing 52% to the total revenue, driven by robust demand in the Middle East.
Order Book and Future Prospects:
As of September 2024, L&T’s consolidated order book stood at ₹5.1 trillion, with approximately 70% of these orders protected by price variation clauses, mitigating commodity risk. Analysts anticipate sustainable order book growth over FY25-FY26, fueled by both domestic and international demand, especially in the hydrocarbon and power transmission sectors.
Technical Analysis
Stock Performance:
L&T’s stock has demonstrated resilience, delivering approximately 45% returns over the past year. The stock reached a record high of ₹3,948.60 on June 3, 2024, and as of November 29, 2024, it was trading at ₹3,739.80. This upward trajectory reflects investor confidence, underpinned by a robust order book and consistent execution.
Analyst Recommendations:
Global brokerages maintain a positive outlook on L&T. Jefferies has set a target price of ₹4,165, Citi at ₹4,396, and Nomura at ₹4,000, all recommending a ‘Buy’ stance. JPMorgan has assigned an ‘Overweight’ rating with a target of ₹3,857, while Bernstein maintains an ‘Outperform’ rating with a target of ₹3,800.
Conclusion and Recommendation
L&T’s strong financial performance, record-breaking order inflows, and strategic international expansion underscore its robust fundamentals. The stock’s positive technical indicators, coupled with favorable analyst endorsements, suggest a promising outlook. Given these factors, L&T appears to be a compelling addition to an investment portfolio at this time. However, investors should remain vigilant regarding potential risks such as execution challenges, commodity price volatility, and geopolitical uncertainties that could impact international operations.