Why L&T shares dived 6% post Q3 results? What analysts say on Larsen & Toubro stock

Shares of Larsen & Toubro Ltd (L&T) tanked over 6 per cent in Wednesday's trade, as despite a beat on Q3 sales, margins for the quarter came in lower than the guidance; profit too disappointed. L&T said it has maintained its focus on mega and ultra-mega projects and has been able to improve working capital YoY to 16.6 per cent of sales but its margins were still below the guidance, owing to legacy order execution and new orders still not achieving the margin recognition threshold, said analysts.

Centrum Broking said L&T's Q3 numbers were weak as margin was 90 basis points short of estimates and PAT was 10 per cent below its estimates. Revenue, though, came in 5 per cent ahead of its expectations. Order inflow and order backlog remains strong with strong contribution from international segment but the margin recovery in core EPC business remained weak, it said.

"The management has upped its order inflow and revenue growth guidance whereas margins guidance in P&M segment has been marginally reduced," it said while suggesting a target of Rs 3,750 on the stock.

Following the results, L&T shares fell 6.05 per cent to hit a low of Rs 3,413.55 on BSE. With this, the stock's year-to-date returns have fallen in the negative terrain. The engineering and construction stock is still up 61 per cent in the past one year.

"We expect L&T to continue to benefit from the strong addressable market in both India and international locations. We revise our estimates to bake in improved inflows and lower margins. We increase our target to Rs 4,200 based on the SOTP methodology, valuing the core business at P/E of 28x Mar'26E EPS and a 25 per cent holding company discount for subsidiaries," said Motilal Oswal Securities.

The brokerage said its higher multiple takes into account the continuously improving prospect pipeline and improvements in net working capital and return on equity, despite margins being lower than guidance.

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