The Larsen & Toubro share price plunged more than 3% intra-day. The stock was among the key losers on the Nifty 50. International brokerage house Nomura downgraded it to ‘Neutral’ from ‘Buy’ rating due to disappointing quarterly results, decelerating long-term growth targets, and valuation concerns. Also, it slashed the target price to Rs 3,940 from Rs 4,510, implying a downside of almost 3%.
L&T records subdued operating performance in Q4
L&T’s Q4 FY26 performance was weaker than expectations, with revenue and EBITDA coming in 4% below Nomura’s estimates. This was driven by execution challenges in domestic water projects due to funding constraints and supply disruptions in West Asia.
L&T: Ambitious order inflow guidance amidst headwinds
Nomura views L&T’s FY27 order inflow guidance of 10-12% as overly ambitious. The brokerage house pointed out that the overall tender pipeline is actually down 6% year-over-year. Further, rising commodity prices are expected to cause significant delays as public authorities reassess bids that exceed their original cost estimates.
Decelerating long-term strategic targets for L&T
The company’s “Lakshya 2031” five-year plan represents a notable deceleration compared to the previous period (FY21-26). Specifically, the target for order inflow CAGR has dropped to 10-12% (down from 20%), and revenue growth is expected to moderate to 12-15% (down from 16%). Nomura finds this deceleration concerning despite L&T’s substantial order backlog.
Nomura cuts L&T earnings estimates
Nomura cut its FY27-28 earnings estimates by 8%. This revision considers the execution disruptions caused by the West Asia crisis and cost headwinds. A significant risk is that many of L&T’s international contracts do not include price-variation clauses, leaving them vulnerable to inflation.
L&T valuations unattractive
The stock is trading at high multiples of 32x FY27 core EPS, which Nomura believes offers “lesser comfort” given near-term uncertainties. Additionally, visibility on improving the Return on Equity (RoE) is limited. L&T missed its 18% RoE target in FY26 and is projected to remain in the 16-17% range through 2031.
L&T share price performance
The share price of L&T has fallen 2.5% in the last five trading days. The stock has given a return of 5.5% in the last one month and 1.3% in the past six months. L&T’s stock price has surged 18% over the last one year.