Why You Should Buy L&T Shares: A Comprehensive Analysis of Q1 Results
Larsen and Toubro Ltd., one of India’s largest infrastructure companies, has reported its Q1 FY26 results, which have left analysts and investors alike intrigued. While the company’s revenue and profit after tax came in 3% and 8% above estimates, respectively, there are some concerns that need to be addressed. In this article, we’ll delve into the details of L&T’s Q1 performance and what it means for investors.
Sharp Outperformance on Core E&C Order Inflows
L&T’s core E&C order inflows for the quarter came in at Rs 766 billion, significantly higher than the estimated Rs 631 billion. This outperformance is attributed to large order wins in the Energy and Infrastructure segments, both domestically and internationally. The company’s order prospect pipeline has also grown by 65% YoY to Rs 15 trillion for the next nine months of FY26.
Execution Delivers
L&T’s execution capabilities have also been impressive, with a 19% YoY growth in revenue from operations. This growth is primarily driven by the ramp-up in international projects, which has helped the company to offset the decline in domestic orders.
Order Prospect Pipeline: A Key Driver of Growth
L&T’s order prospect pipeline has historically had a hit ratio of 20-25%, and if the company maintains this hit rate, it could grow its order inflows far more than its FY26 guidance of 10% YoY growth. This pipeline is expected to be a key driver of growth for the company in the coming quarters.
Sustainability and RoE Improvement
L&T’s sustainability efforts have also been impressive, with net working capital levels at 10.1% of sales, down from 11.4% in the previous quarter. The company’s RoE has also improved to 17%, up from 15.5% in the previous quarter.
Target Price Hike
Motilal Oswal has maintained its ‘buy’ rating on L&T shares and has hiked its target price to Rs 4,200, based on 28 times two-year forward earnings for the core business and a 25% holding company discount to subsidiaries.
What’s Next for L&T?
L&T is expected to continue its growth trajectory in the coming quarters, driven by its strong order book and execution capabilities. The company is also expected to scale up its presence in the GCC region, particularly in areas such as renewable energy and transmission projects.
Final Thoughts
In conclusion, L&T’s Q1 results have been mixed, but the company’s strong order book and execution capabilities make it an attractive investment opportunity. With a target price hike and a ‘buy’ rating from Motilal Oswal, investors may want to consider adding L&T shares to their portfolios.