LKP Research has issued a “BUY” recommendation for infrastructure major Larsen & Toubro (L&T), underscoring a 12-month price target of Rs 4,135 per share—a potential 13% upside from current levels. The call is grounded in L&T’s dynamic execution, sustained order inflows, and prudent sectoral diversification, all of which underpin a resolute growth outlook. Recent results reveal strong operational momentum, fortified by compelling order book expansion, margin stability despite cyclical cost pressures, and a visible pipeline across both domestic and international segments. Investors are advised to consider these factors as L&T cements its leadership in engineering and construction, with renewed strategic focus on new-age sectors—green energy and semiconductors.

Strong Q1 FY26 Performance: Tangible Growth Amid Transitory Challenges

L&T reported healthy revenue growth of 15.5% year-on-year, reaching Rs636.8 billion for Q1 FY26, propelled by steadfast execution, especially in Infrastructure and Energy. Quarter-on-quarter, revenue did decline by 14.4%—a reflection of seasonal contraction post a stellar Q4. The group’s consolidation across verticals buttresses operational robustness, with Infrastructure revenue at Rs290.3 billion and Energy surging 46.7% YoY to Rs124.7 billion. Margin moderation, with EBITDA at 9.9% (down 27bps YoY), indicated near-term cost pressures, yet net profitability saw an uptick as PAT margins improved to 5.7% on the back of higher other income and tax efficiency.

Resilient Order Inflows and Order Book: Securing Future Growth

Remarkable order inflows of Rs944.5 billion in Q1 FY26 mark a 33.2% surge year-on-year, driven by substantial wins in Infrastructure (44%), Energy (33%), and Services (19%) segments. Notably, international orders constitute 52% of this inflow, elevated by a marquee Ultra-Mega contract in Hydrocarbon Offshore, underscoring L&T’s broadening Middle Eastern footprint. L&T’s consolidated order book now stands at an imposing Rs6.13 trillion, up nearly 25% YoY and translating to 2.3x trailing revenues—securing visibility for future performance.

Valuation Rationale and Target Price: Core Business Anchors Upside Potential

LKP values L&T’s core standalone engineering business at 25x FY27E earnings, factoring in a Sum-of-the-Parts (SoTP) framework that incorporates stakeholdings in technology, finance, and other subsidiaries, alongside a strategic holding company discount. The research house justifies a price target of Rs4,135 per share, underpinned by forecasted EPS growth from Rs109 in FY25 to Rs167 in FY27, and improving return ratios—RoE is projected at 18.6% for FY27.

Segmental Performance: Balanced Strengths Back Diversification

Infrastructure Projects: Delivered Rs290.3 billion in Q1 FY26 revenue—a 6.8% YoY rise, though a seasonal 26.3% QoQ fall. EBIT margins held steady at 4.4% YoY but moderated from a strong prior quarter.

Energy Projects: Revenue saw a robust 46.8% YoY jump, buoyed by hydrocarbon execution. EBIT margin dipped from 7.9% to 6.7%—noted as due to a shift in order mix toward lower-margin projects.

Hi-Tech Manufacturing: Impressive 75.1% YoY revenue growth to Rs33.6 billion, maintaining an EBIT margin close to 13%.

IT & Technology Services and Financial Services: Showed moderate but steady improvement, with IT revenues up 9.7% YoY and Financial Services up 8.4% YoY.

Tactical Strategic Initiatives: Green Energy, Semiconductors, and ESG

L&T continues to sharpen its edge by venturing into green energy and semiconductors. A landmark 25-year contract with IOCL for India’s first large-scale green hydrogen plant, alongside the acquisition of a Japanese semiconductor power module business, reflects institutional commitment to emerging technologies. ESG credentials are set to strengthen with the issuance of India’s first SEBI-regulated ESG bond, netting Rs5 billion, and a stake in E2E Networks to bolster digital infrastructure.

Order Pipeline and Guidance: Confidence in Growth Resilience

Management reaffirms an order inflow growth target of 10% and revenue growth of 15% for FY26, with a robust total order pipeline of Rs14.8 trillion for the next nine months. The order book is well-diversified—54% domestic, 46% international—anchored by large exposures to public infrastructure, oil & gas, and a rising share of private capex in sunrise sectors.

Operational Highlights and Risk Outlook

The macroeconomic backdrop remains supportive, with India’s steadied policy environment and an upcycle in public expenditure. Labour churn presents an operational challenge, to which L&T responds through automation and advanced construction methodologies. Margins remain stable despite segmental headwinds, as cost management and value accretive orders win the day. Risks include competitive pressure in the hydrocarbon segment and minor impact from time overruns in infrastructure execution.

Levels for Traders and Investors

Stock Levels: L&T currently trades at Rs3,665 per share, with a 52-week range of Rs2,965–Rs3,964. Support is visible near Rs3,500, while immediate resistance lies at the Rs3,960 zone. Investors should consider incremental accumulation, especially on dips towards Rs3,600 or lower, as the valuation rerating is justified by the strong execution pipeline and sectoral tailwinds.

Target: The 12-month target set by LKP Research is Rs4,135 per share, rendering a clear case for a “Buy” with a potential 13% upside underpinned by multifaceted growth drivers.

Bottomline for Investors: L&T—A Bellwether Poised for Sustained Outperformance

Anchored by an expanding order book, visible growth across strategic verticals, and ongoing transformation in technology adoption, Larsen & Toubro is positioned to outperform the broader market. The LKP Research “Buy” call, with its diligent price target, is rooted in realistic projections and an analysis of both macro and company-specific levers. Investors looking for exposure to a high-conviction engineering and infrastructure play with strong future visibility will find L&T a compelling choice at current levels.