Fundamental Report Larsen & Toubro Limited (L&T)

Larsen & Toubro Limited (L&T) is one a leading private sector enterprise with expertise in technology, EPC, and manufacturing. The company has earned a strong reputation for its customer-centric approach and commitment to world-class quality, which has enabled it to lead across its core business areas. With a global presence, L&T is a USD 27 billion multinational engaged in Engineering, Procurement, and Construction (EPC) projects, hi-tech manufacturing, and various services. The company’s relentless pursuit of excellence, innovation, and quality has been central to its continued leadership in the industry, establishing it as a trusted partner in delivering large-scale projects and solutions across diverse sectors worldwide.

Recommendation                          ACCUMULATE

Accumulation Price                                         Rs.  3,150-3,100

Target Price                                    Rs.  4200

Time Horizon 12 Months

Business Model

EPC Projects:- EPC Projects focus on the proven core competencies of conceptualising, designing, executing, and commissioning large, complex projects in the areas of mobility infrastructure, power transmission and distribution, water and irrigation infrastructure, buildings and factories, metals and mining, energy generation & storage solutions, oil & gas, and energy transition.

Hi-Tech Manufacturing:- Hi-Tech Manufacturing focusses on custom-designed and built equipment catering to process plants for various sectors (including nuclear), precision engineering and systems for the defence & aerospace sectors, electrolysers for hydrogen production, industrial and bulk material handling, construction machinery and mining equipment, and industrial valves.

Services:- The Services businesses cater to sectors of IT (through LTIMindtree), Engineering R&D (through LTTS), financial services (through L&T Finance), real estate development (through L&T Realty), B2B E-commerce (through L&T-SuFin), skilling and assessment (through L&T EduTech), data/cloud services (through L&T-Cloudfiniti) and fabless chip design (through L&T Semiconductor Technologies).

Management Commentary on the business & its future prospects:

1. L&T secured a 5.2 GW solar project in the UAE, marking a major renewable energy investment. The project, in partnership with Power China, strengthens L&T’s presence in the renewable energy sector.
2. L&T is cautious about short-term defense orders, with no immediate prospects expected. It received a repeat order worth Rs 6,500 crores for the Vajra project, maintaining a positive long-term defense outlook.
3. L&T’s CarbonLite business secured Rs 23,000 crores in orders for 4 GW ultra-mega plants. This includes BTG components and will contribute to expanding the company’s renewable energy portfolio with future EBITDA recognition.
4. EBITDA margins declined due to lower-margin P&M revenue and reduced IT&TS margins. L&T expects margin recovery as the year progresses, with improved revenue composition and stabilization in subsequent quarters.
5. L&T’s order book remains strong, especially in Projects & Manufacturing. Large contracts, including a Rs 500 billion order, are key to revenue targets but may face delays or slippages into future quarters.
6. L&T’s Telangana metro project receives Rs 3,000 crores in soft loans, with Rs 900 crores disbursed. Further disbursements and TOD monetization aim to reduce third-party debt and lower interest costs.

Q3FY25 Result Analysis

7. Revenue Performance: The company reported a revenue from operations of ₹64,667.78 crore in Q3 FY ’25, reflecting a growth of 17.3% from ₹55,127.82 crore in Q3 FY ’24 on a YoY basis. On a QoQ basis, the revenue increased by 5.06% from ₹61,554.58 crore in Q2 FY ’25, showcasing consistent growth and operational efficiency. This performance highlights the company’s strong sales momentum and ability to drive revenue growth in a competitive market.
8. Profit After Tax (PAT): The company achieved a profit after tax (PAT) of ₹4,001.03 crore in Q3 FY ’25, marking an 11.3% growth compared to ₹3,594.51 crore in Q3 FY ’24. On a QoQ basis, PAT showed a slight decline of 2.7% from ₹4,112.81 crore in Q2 FY ’25. Despite the QoQ dip, the YoY increase reflects improved profitability and effective cost management, reinforcing the company’s strong earnings capacity.
9. EBITDA Performance: EBITDA for Q3 FY ’25 stood at ₹7,898.16 crore, representing a growth of 9.7% from ₹7,198.65 crore in Q3 FY ’24 on a YoY basis. However, on a QoQ basis, EBITDA declined marginally by 0.23% from ₹7,917.05 crore in Q2 FY ’25. The YoY growth demonstrates improved operational performance, while the slight QoQ decline indicates a stable but slightly moderated performance in the most recent quarter.
10. EBITDA Margin: The EBITDA margin for Q3 FY ’25 was 12.21%, showing a decrease from 13.06% in Q3 FY ’24 on a YoY basis, and from 12.86% in Q2 FY ’25 on a QoQ basis. While the margin has seen a reduction, it reflects the company’s ability to maintain operational efficiency and profitability despite external pressures. The lower margin on a YoY and QoQ basis is largely driven by increased costs and economic conditions.

Profit and Loss Statement:

Particulars (In Cr)	FY24	FY23	FY22
Revenue From Operations	221112.91	183340.7	156521.23
Other Income	4158.03	2929.17	2267.08
Total Revenue	225270.94	186269.88	158788.31
EXPENSES:
Cost of Material Consumed	74256.22	62232.46	50607.05
Purchases of Stock-in-Trade	1063.77	1052.86	1069.5
Changes in Inventories	1021.07	-3156.64	-2076.6
Employee Benefits / Salaries & other Staff Cost	41171.02	37214.11	29695.79
Finance Cost	9260.75	9233.6	9078.24
Depreciation and Amortization	3682.33	3502.25	2947.95
Other Expenses	74392.28	59218.19	53068.34
Total Expenses	204847.44	169296.83	144390.27
Profit Before Exceptional Items and Tax	20423.5	16973.04	14398.04
Exceptional Items Before Tax	93.61	135.99	96.93
EBT	20517.11	17109.03	14494.97
Tax	4947.39	4484.16	4203.92
PAT	15569.72	12624.87	10291.05

Balance Sheet:

Particulars (In Cr)	202403	202303	202203
SOURCES  OF  FUNDS :
Share Capital	274.93	281.1	496.66
Reserves Total	86084.31	89044.85	82126.65
Total Shareholders’ Funds	86359.24	89325.95	82623.31
Minority Interest	16190.42	14241.27	12966.07
Secured Loans	78930.87	81689.18	80290.25
Unsecured Loans	37391.35	38961.26	45002.18
Total Debt	116322.22	120650.44	125292.43
Other Liabilities	1701.47	1224.68	961.98
Total Liabilities	220573.35	225442.34	221843.79
APPLICATION OF FUNDS :
Net Block	42963.82	42641	42945.01
Capital Work in Progress	3045.01	3065.57	1249.55
Investments	45647.82	44798.31	39395.18
Current Assets, Loans & Advances
Inventories	6620.19	6828.78	5943.32
Sundry Debtors	48770.95	44731.53	46139.32
Cash and Bank	15358.39	22519.6	18953.17
Loans and Advances	111367.35	111562.19	107367.69
Total Current Assets	182116.88	185642.1	178403.5
Less : Current Liabilities and Provisions
Current Liabilities	113202.28	99392.61	92518.44
Provisions	5317.98	4886.93	4665.68
Total Current Liabilities	118520.26	104279.54	97184.12
Net Current Assets	63596.62	81362.56	81219.38
Deferred Tax Assets	11272.1	10357.15	9610.4
Deferred Tax Liability	7942.01	7002.79	7809.63
Net Deferred Tax	3330.09	3354.36	1800.77
Other Assets	61989.99	50220.54	55233.9
Total Assets	220573.35	225442.34	221843.79

Cash Flow Statement:

Particulars (Cr.)	202403	202303	202203
Cash Flow Summary
Cash and Cash Equivalents at Beginning of the year	16926.69	13770.24	13373.52
Net Cash from Operating Activities	18266.28	22776.96	19163.58
Net Cash Used in Investing Activities	2178.89	-8048.02	-3585.38
Net Cash Used in Financing Activities	-25413.36	-11572.49	-15181.48
Net Inc/(Dec) in Cash and Cash Equivalent	-4968.19	3156.45	396.72
Cash and Cash Equivalents at End of the year	11958.5	16926.69	13770.24

Outlook:

Larsen & Toubro Limited (L&T) is one a leading private sector enterprise with expertise in technology, EPC, and manufacturing. The company is known for its commitment to quality and innovation, the company executes large-scale projects across various sectors. With a growing international presence, L&T continues to strengthen its leadership in global engineering and construction through strategic expansion.

In the last nine months, the company has reported a revenue of Rs 18, 1342 crore, which is up 17.7% on a YoY basis, in same period the company has reported PAT of Rs 11,553.95 crore which is up 9.3% on a YoY basis, EBITDA margin during the period remain at 12.61%. In the last nine months, it has recorded an EPS of Rs 69.38, compared to the EPS of Rs 55.85 in FY24 and based on TTM earnings the company is currently trading at a P/Ex of 31.2.

Given the company’s robust financial performance, Strong Order Book, Expansion in international and domestic market and the outlook for Q4FY25, we believe L&T is well-positioned for continued growth.

Based on these factors, we recommend an Accumulate rating with a price range of Rs 3,150-3,100, for the target price of Rs 4,200 within the next 12 months.

Source: Company website, EWL Research

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