Larsen & Toubro (L&T) – Engineering India’s Future with Global Scale
1. Company Overview
Larsen & Toubro Ltd. (L&T) is India’s largest engineering and construction conglomerate with diversified presence across Infrastructure, Energy, Hi-Tech Manufacturing, IT & Technology Services, and Financial Services. Over the decades, it has transformed into a global EPC (Engineering, Procurement & Construction) leader while simultaneously building domestic capabilities in heavy engineering, hydrocarbons, renewable energy, and defense systems.
The company plays a vital role in nation-building projects such as metros, expressways, bridges, power T&D, green hydrogen ecosystems, data centers, and defense engineering systems.
2. Industry Outlook
Infrastructure: India’s annual infra outlay of ₹11+ lakh crore continues to create massive opportunities in roads, metro rail, water, and renewable energy projects.
Energy: Transition towards green hydrogen, renewables, and carbon capture projects drives new order inflows globally.
Hi-Tech Manufacturing: Growth in precision engineering, aerospace, and defense manufacturing supports Make in India.
IT & Services: Subsidiaries like LTIMindtree and LTTS continue to expand globally in digital, cloud, and engineering services.
3. Historical Financial Performance
👉 Over 25 years, Sales CAGR is ~15% and Profit CAGR is ~15%, showing consistent compounding.
4. Profit Margins Trend
Margins have generally ranged between 5–10%, with peak phases during infra execution cycles. Current margin is 7%, reflecting strong execution despite global cost challenges.
5. Valuations – Historical PE & PBV
PE Range: Historically traded between 10x (low cycles) and 35x (high optimism). In FY25–26, range has tightened to 26–36x.
PBV Range: 2x–6x over the last 20 years, currently 4.0–5.1x.
This provides an important valuation band for long-term entry/exit strategy:
Low PE (<26) → Accumulate
Fair PE (29–32) → Hold
High PE (>36) → Partial profit booking
6. Q1 FY26 Results (April–June 2025)
Revenue: ₹63,678 Cr (+16% YoY)
Profit After Tax: ₹4,325 Cr (+26% YoY)
Order Inflow: ₹94,500 Cr (+33% YoY) led by Infrastructure & Energy projects
Order Book: ₹6,12,800 Cr (+25% YoY), of which 46% is international
EBITDA Margin: 9.9% (vs 10.2% YoY, slightly lower due to revenue mix)
ROE: 17% (vs 14.7% last year)
Debt/Equity: 1.13x – comfortable considering asset-heavy infra business.
7. Segmental Insights
Infrastructure Projects (45% of revenue): ₹2,877 Cr domestic & ₹1,767 Cr international. Order book strong with ₹3.3 lakh crore pipeline.
Energy Projects (20%): Revenue up 47% YoY driven by Hydrocarbon & CarbonLite Solutions.
Hi-Tech Manufacturing (5%): Revenue growth 75% YoY, driven by defense and heavy engineering.
IT & Tech Services (28%): LTIMindtree & LTTS contributed ₹12,600 Cr, 10% growth.
Financial Services: Profit steady, retail lending book forms 98% of loan portfolio, RoA at 2.37%.
8. Order Book Strength
₹6.1 lakh crore as of June 2025
Segment mix: Infrastructure 61%, Energy 30%, Hi-Tech Manufacturing 6%, Others 3%
Geographic mix: India 54%, Middle East 37%, Rest of World 9%
This order book ensures 3 years of revenue visibility, with a robust ₹15 trillion tender pipeline in the next 9 months.
9. Growth Outlook & Estimates
10. Peer Comparison (Engineering & Infra Majors)
L&T is a Leading Company with large market share compared to global-tech peers, & also offers diversified growth visibility.
11. Conclusion – Risk & Reward
Strengths: Strong order book, global infra execution capability, leadership in energy & green projects, consistent financial compounding.
Risks: Execution delays, global commodity costs, policy changes, and cyclical infra demand.
Reward: At current valuations, L&T offers a blend of stability + growth, making it a core holding for long-term investors.
📌 Portfolio Weightage Suggestion: ~4% allocation, given stable growth, global diversification, and steady compounding.
Disclosure
This report is for educational purposes and unbiased investor learning. It does not constitute direct investment advice.
