Larsen & Toubro (L&T) shares surged 3% after the engineering and construction major reported its Q3FY26 results. Though the headline numbers were below street estimates, the strong order inflow and improvement in prospect pipeline added to investor optimism.
While the results were mixed in parts, let’s take a look at brokerage view on this stock –
L&T Q3FY26 numbers
L&T reported consolidated revenue of Rs 71,400 crore in the December quarter (Q3FY26), while earnings before interest, tax, depreciation and amortisation (EBITDA) stood at Rs 7,400 crore and profit after tax (PAT) came in at Rs 4,100 crore.
Motilal Oswal on L&T: ‘Buy’
Motilal Oswal has retained a ‘Buy’ rating on L&T and raised its target price to Rs 4,600. This implies an upside of about 21% from current levels. According to the brokerage report, “order inflows remained strong at Rs 1.2 trillion, driven by large order wins in domestic and international markets, providing healthy visibility for revenue.”
The brokerage highlighted that L&T’s prospect pipeline improved to Rs 5.9 trillion, up 7% year-on-year.
As per the brokerage report, “an improved prospect pipeline of Rs 5.9 trillion…further reduction in NWC and healthy RoE give comfort.”
Motilal Oswal also noted that L&T’s exposure to commodity and currency risks is well managed. As per the report, “LT’s order book comprises 55% of fixed-price contracts and 45% variable-pricing contracts.”
The brokerage expects legacy low-margin projects in infrastructure and energy to taper off over the next two to three quarters, which could gradually ease margin pressure.
JM Financial on L&T: ‘Buy’
JM Financial has also maintained a ‘Buy’ rating on L&T, with a target price of Rs 4,655. This translates to an upside of nearly 23%. The brokerage in its report noted that order inflows were the biggest positive surprise of the quarter.
As per the brokerage report, “L&T delivered consolidated order inflows of Rs 1.36 trillion (+17% YoY, +17% QoQ) which were 24% ahead of our estimates.”
JM Financial pointed out that core engineering and construction revenues missed estimates due to weakness in energy and infrastructure segments. Meanwhile, higher-margin real estate deliveries helped support overall margins. According to the report, “a surge in high margin Realty sales…offset margin weakness due to the impact of legacy projects in Energy.”
The brokerage has raised its order inflow estimates for FY26, now expecting growth of 24% versus management’s guidance of over 10%. It also expects order inflow momentum to continue into FY27, supported by a strong international outlook, particularly from Europe and the Middle East.
JM Financial noted that net working capital to sales dropped sharply during the quarter, while return on equity remains on track to improve. According to the brokerage, “NWC guidance now at 10% (vs 12% earlier), adjusted ROE closer to 18%.”
L&T: Valuation debate and risks
The brokerages have also highlighted risks. Motilal Oswal flagged concerns such as “a slowdown in order inflows, delays in the completion of mega and ultra-mega projects, a sharp rise in commodity prices, an increase in working capital, and increased competition.”
Valuation remains a consideration as well. Motilal Oswal trimmed its valuation multiple slightly to factor in slower execution and margin pressure in select segments, while JM Financial believes current valuations are reasonable given L&T’s long-term earnings growth outlook.
Conclusion
Overall, as per the brokerage reports, L&T’s near-term execution challenges are being balanced by strong order inflows, a strong pipeline and improving balance sheet metrics. While margins and execution will be closely watched over the next few quarters.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.