Larsen & Toubro Ltd (L&T) reported a less-than-expected March quarter results due to soft execution in core engineering, procurement, and construction (EPC) segment, triggering downgrades in earning estimates by analysts. L&T's FY26 core revenue grew 12 per cent, missing the 15 per cent guidance, due to delays in domestic water projects and slower international progress amid West Asian conflict. Margin for FY26 at 8.3 per cent also fell short of 8.5 per cent guidance, analysts said. They see softer execution in H1FY27, while noting that the company's Lakshya 2031 plan focuses on mainly on investments in new-age areas such as industrial electronics, semiconductors, creation of lab facilities, green hydrogen, and data centers across hyper-scalers and non-hyper scalers. 

Nuvama Institutional Equities said while core order inflows were down 3 per cent year-on-year (YoY), execution growth stayed modest at 10.5 per cent YoY.  It said L&T's core Ebitda margin at 9.4 per cent, down 50 basis points YoY, hurt by execution disruptions in March weighing on project performance.

"Retain ‘HOLD’ pending clarity on ME conflict, as he management assumes recovery only from H2FY27. We are trimming consolidated FY27E/28E EPS by 7 per cent/13 per cent, valuing core E&C at 25x FY28E EPS yielding a target of Rs 4,050 (Rs 4,400 earlier)," it said.

Lakshya 31 roadmap announced
Emkay Global said L&T’s ‘Lakshya 31’ is a strategic roadmap aimed at scaling up high-margin segments such as services, technology, and international EPC, while maintaining disciplined execution in its core infrastructure business. 

In line with this vision, L&T has laid out an ambitious capex plan across emerging and core segments, including Rs 5,000 crore for Industrial and Defense electronics’ manufacturing, Rs 3,000 crore for Semiconductor, Rs 15,000 crore for Green Hydrogen, Rs 10,000 crore on Data Center, Rs 4,400 crore for Realty business, and finally Rs 5,000 crore for the Hydrocarbon and Shipbuilding business.   

"Despite the strong order inflow and robust backlog, L&T’s Q4FY26/FY26 performance was impacted by weaker execution and margin pressures. We expect a gradual recovery, as higher share of the international order book amid the ongoing West Asia conflict remains a near-term overhang. Accordingly, we cut FY27E/FY28E EPS by 9 per cent/8 per cent, factoring in the lower revenue growth and Ebitda margin assumptions," it said. 

This brokerage downgraded the stock to 'ADD', with revised down SOTP-based target price of Rs 4,450.     

West Asia war impact
L&T has indicated that its Middle East order book stands at around Rs 3 lakh crore and currently work is progressing normally and payments are coming on time. The company has not seen cancellations of its projects, but deferment is seen in new project awards. 

"Indirect impact of higher logistic and insurance costs is currently being felt on projects, and wherever possible, L&T is in discussions with respective clients for a pass-through mechanism. The company lost nearly Rs 5000 crore worth of revenue during the quarter due to the West Asia crisis and delays in water project completion on the domestic front," MOFSL said.

L&T FY27 guidance
For FY27, L&T has guided order inflow growth of 10-12 per cent. Revenue growth is seen in a similar range of 10-12 per cent, with H1 expected to be softer due to the ongoing supply chain disruptions, and a pickup is expected in H2, as these constraints ease out. 

On the reclassification basis of the segments wherein realty business is excluded, core business margins for FY27 are expected to be in line with FY26 margins at 7.8 per cent. Net working cycle-to-sales is expected to normalise from current 4 per cent levels to 10 per cent in FY27.

"At the current price, for core E&C, LT is trading at 31 times/23 times P/E on FY27/28E earnings. Rolling forward to Jun’28, we arrive at a revised SoTP-based target price of Rs 4,550 (Rs 4,200 earlier), based on 25x two-year forward earnings for core business and a 25 per cent holding company discount to subsidiaries," MOFSL said.