Mar'25 View on Larsen & Toubro Ltd

Larsen & Toubro Ltd is a multinational conglomerate which is primarily engaged in providing engineering, procurement and construction (EPC) solutions in key sectors such as Infrastructure, Hydrocarbon, Power, Process Industries and Defence, Information Technology and Financial Services in domestic and international markets. the stock has fallen from its high near 4,000 level and is now resting at 3,100 level but the stock has further weakness due to following problems. • Growth moderation seen in domestic, overseas may happen with a lag. • Return ratios reasonable and would limit prospects of margin improvement. • Implied trading multiples are stiff to justify in such a context. • We note the risk of growth moderation in spending by the center and states for some common and other uncommon reasons. • This makes L&T lack the required launchpad. • Next few years of business growth would be driven by GCC and the existing backlog. • Current estimates capturing the near-term upside well; REDUCE stays. • Cut FV to Rs2,850 from Rs3,050 on a 1-3% earnings cut and lower 22X earnings multiple.