Motilal Oswal Maintains Buy Recommendation for Larsen and Toubro with a Price Target of Rs 4400.

Larsen and Toubro (LT) Research Report

Summary

Motilal Oswal's research report on Larsen and Toubro (LT) highlights a shift in the company's growth thesis from a 'sum-of-the-parts' to a 'moving parts' thesis. This change is driven by the impact of a constantly changing Middle East scenario on the company's core EPC business and increasing risks for its IT business due to AI-led disruption.

Key Findings

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• LT's strong order book and prospects of healthy core PAT earnings over FY25-28E remain positive.
• Near-term headwinds persist due to:
  • International revenue, with the Middle East accounting for nearly 39-40% of its total order book as of 9MFY26.
  • IT subsidiary's valuations, impacted by AI-led disruption.
• The Middle East scenario remains uncertain, potentially impacting execution and margins for certain projects in the near term.

Recommendation

We adjust our core business valuations to 25x (from 27x) to reflect the current volatile scenario, resulting in a revised two-year forward target price of INR4,400 (vs. INR4,600 earlier). We maintain a BUY recommendation for Larsen and Toubro (LT).