Motilal Oswal Financial Services has issued a BUY Call on Larsen & Toubro (L&T), projecting sustained growth backed by a diverse order book, operational momentum, and strategic expansion into future-ready sectors. The report highlights L&T’s execution dominance in mega projects, rapid scaling in defense and green energy, and strong order win rates. With a target price of Rs 4,300 and key financial metrics forecasting double-digit CAGR for revenue, EBITDA, and profit, Motilal Oswal underscores L&T as an indispensable bellwether for India’s infrastructure evolution. Investors are urged to capitalize on sectoral tailwinds, new business verticals, and global opportunities while remaining vigilant about execution risks, geopolitical headwinds, and commodity volatility.

1. Research House View and Investment Rating

Motilal Oswal Financial Services maintains a BUY recommendation on Larsen & Toubro (L&T), setting an elevated target price of Rs 4,300, based on an SOTP (Sum-of-the-Parts) methodology and rolling forward to September 2027 estimates. The report values the core EPC business at 28x forward earnings, and applies a 25% holding company discount to the value of subsidiaries, marking L&T as a compelling investment for long-term capital appreciation.

2. Execution Momentum in Mega Projects

L&T’s execution prowess is reaffirmed by its ability to ramp up delivery on mega infrastructure projects in both domestic and international markets, fueling sustained revenue growth. Strong performance in the Middle East, particularly across hydrocarbon and gas, is offsetting flatter domestic trends, ensuring revenue expansion regardless of near-term sectoral vagaries.

3. Fortress Order Book and Pipeline

L&T boasts a colossal order book of Rs 6.1 trillion as of 1QFY26, with an overall prospect pipeline estimated at Rs 15 trillion for the remaining fiscal year. The company's order win rate within this pipeline stands at an impressive 18–20%, translating into potential inflows of Rs 3–3.2 trillion and setting the stage for 10% year-on-year growth.

4. Strategic Expansion into New Businesses

L&T is aggressively scaling four future-facing verticals: real estate, semiconductors, green energy, and data centers, backed by the next phase of its 'Lakshya' strategic agenda through FY31. In real estate, the company targets Tier-1 cities and is contemplating an IPO by FY27/28, while in green energy, massive investments are underway for hydrogen and ammonia production, and electrolyser capacity expansion.

5. Defense Vertical: Acceleration and Partnerships

L&T’s defense business, housed within its hi-tech manufacturing division, targets a pipeline of Rs 215 billion and leverages collaborations, such as a strategic tie-up with BEL for India’s AMCA project, to strengthen its presence in naval, weapon, and aerospace systems. The defense order inflows are registering a 36% CAGR, far outpacing the core EPC vertical.

6. Financial Performance and Guidance

FY26–28 projections for consolidated financials reflect an 11% CAGR in order inflows, 16% CAGR in core EPC revenue, and 18–21% CAGR in EBITDA and PAT, catalyzing margin expansion and return on equity improvements. L&T is forecasted to achieve an EPS of Rs 185.0 by FY28, with a healthy dividend payout ratio (31.1%) and steady improvement in capital efficiency.

7. Valuation Metrics and Shareholding Pattern

At the current market price of Rs 3,674, the valuation stands at 28.2x/23.7x/19.9x PE for FY26/FY27/FY28, and PBV at 4.6x/4.0x/3.6x, with institutional investors (DIIs and FIIs) holding a significant portion of equity. The dividend yield is expected to rise to 1.6% in FY28, supported by both operational and financial leverage.

8. Recent Landmark Orders

Major headline wins include ultra-mega thermal orders (Rs 230 billion from Adani), nuclear (NPCIL), high-speed rail, renewables, and offshore hydrocarbon contracts (Rs 150 billion in the Middle East), underlining L&T’s unbeatable credentials in big-ticket engineering. These orders naturally augment revenue visibility and fortify L&T’s leadership in the capital goods sector.

9. Growth Trajectory in Emerging Segments

Green hydrogen, semiconductor design, and data center buildout are set to accelerate, with capacities and investments already earmarked for scale-up.

• Electrolyser capacity: Targeting 1 GW from current 400 MW.
• Data centers: Scaling from 32 MW to 100 MW.
• Semiconductors: USD 100 million allocated, full control over SiliConch Systems.

10. Key Risks and Investor Considerations

Critical downside risks include a potential slowdown in order inflows, execution delays, commodity price spikes, and geopolitical uncertainties. Investors must monitor competition, project completions, and working capital management as key metrics for sustained outperformance.

11. Financial Forecasts & Valuation

12. Strategic Outlook and Anderson’s Investor Take

L&T stands as a paragon of execution in the capital goods sector, with the ongoing ‘Lakshya’ initiative promising continued innovation and value creation across its diverse business verticals. With well-defined financial metrics, resilient order flows, and emerging sector exposure, L&T’s risk-reward profile is uniquely attractive, justifying Motilal Oswal’s bullish stance and forward-looking endorsements. Investors seeking enduring value in India's infrastructure story should consider staggered accumulation at Rs 3,674, with positional targets at Rs 4,300 for FY27, but remain tactically alert to swings in macro and project-specific parameters.