On Thursday, CLSA maintained its Outperform rating on Larsen & Toubro Ltd. (LT:IN) (OTC: LTOUF) stock with a steady price target of INR4,151.00. The firm highlighted the company's third consecutive quarter of margin expansion in its Engineering & Construction (E&C) segment as a positive indicator. The recent quarter's performance was noted for its unexpected growth in order inflows, strong execution, and an increase in the backlog to $96 billion, a 12% year-over-year rise.
The company's Infrastructure segment saw a margin expansion of 60 basis points, which is anticipated to be well received by the market. Despite a generally slow quarter for India, Larsen & Toubro's order inflows surpassed expectations. The robust E&C execution, which increased by 27% year-over-year, contributed to the backlog growth.
CLSA pointed out that even with an 8% decline in the six-month pipeline, L&T is optimistic about a rise in core E&C inflows and margins, as well as initiatives to enhance return ratios. The firm expects Larsen & Toubro's margins to improve in financial years 2025-2026 due to a reduction in legacy orders and the maturation of execution processes.
The report concludes with a reaffirmation of the Outperform rating, expressing confidence in Larsen & Toubro as a key player in the anticipated capital expenditure cycle under the Modi 3.0 government and the broader Growth and Manufacturing (G Me) capex cycle.
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