Target: ₹4,150
CMP: ₹3,623
Larsen Toubro’s Q1-FY25 results were 3 per cent ahead of our estimates on both revenue and PAT. The company reported 15/15/12 per cent y-o-y growth in revenue/EBITDA/PAT on a consolidated basis. In a seasonally weak quarter, core E&C revenues and EBITDA also grew by 18/21 per cent y-o-y, with Core E&C margins improving by 10 bps to 7.6 per cent. Both Core E&C revenue and margin beat our estimates.
Core E&C revenue growth was largely driven by sharp improvement in overseas revenue, while domestic revenue was flat YoY due to elections, labor shortage and heat waves.
Order inflows/order book were up by 8/19 per cent y-o-y, mainly driven by international geographies. The order prospect pipeline was down by 10 per cent y-o-y at ₹9.1 lakh crore due to a drop in hydrocarbon prospects. NWC remained low at 13.9 per cent of sales.
We maintain our estimates and TP of ₹4,150 based on SOTP, valuing core business at 30x P/E on Jun’26E EPS and 25 per cent holding company discount for subsidiaries.
Key risks: A slowdown in order inflows, delays in the completion of mega and ultra-mega projects, a sharp rise in commodity prices, increase in working capital, and increased competition are a few downside risks to our estimates.