One key engineering sector stock that continues to grab headlines on the back of its order win spree is undeniably Larsen & Toubro. Motilal Oswal has maintained its ‘Buy’ on L&T with a target price of Rs 4,500, implying an upside of 12% from the current market price. The management remains focused on its capital allocation strategy and expects to hive off non-core assets soon and keep investing in new-age areas over the next five years.
Motilal Oswal on L&T: Focus on Middle East market
The company’s management is optimistic about the opportunities in the Middle East and expects L&T to benefit from continued growth in orders of 10-15% over the next five years. “The company has learnt from its past mistakes and now has diversified its country base in the Middle East, such as Saudi Arabia, Kuwait and Qatar,” said Motilal Oswal.
Not just regions, the company has diversified its projects across hydrocarbon – onshore as well as offshore, gas-related projects, renewables, and transmission. This also helps the company to tide over the volatility in oil prices.
Motilal Oswal on L&T: Flat growth in domestic order flow
Domestic orders for L&T have largely remained flat over FY23-25, primarily due to a limited availability of large-scale projects from the government during this time, along with L&T’s cautious stance due to increased competition. With private and government capex ramping up in select areas, L&T overall expects a 5% CAGR in domestic order inflows over FY25-28.
Motilal Oswal on L&T: Optimistic of thermal BTG-related opportunities
The company is optimistic about thermal BTG opportunities and has already bagged two large projects. The first one is an NTPC order worth more than Rs 15,000 crore in Madhya Pradesh and Bihar, while the second one is from Adani Power worth Rs 26,000 crore to set up 8 thermal power units of 800MW. Plus, the company is in discussions with Torrent Power for the upcoming thermal power opportunities.
Motilal Oswal on L&T: Focus on capital allocation
L&T’s management, further, remains focused on its capital allocation strategy and expects to cut off non-core assets soon and keep investing in new-age areas over the next five years. The divestment of the Hyderabad metro is expected to be completed by March 2026. Under the arrangement, the entire debt of Rs 13,000 crore of Hyderabad Metro would be taken over by a Special Purpose Vehicle (SPV) floated by the Telangana government. The company is also evaluating the divestment of the Nabha Power project.
Overall, L&T expects to invest a total of Rs 1 lakh crore in all these areas over the next five years.
