---
endpoint: analytics
pattern: Conglomerates
status: done
latency_ms: 391458
conversation_id: 08aad414-36d7-4356-ac9f-b916dae14deb
citations: 8
created: 2026-05-31 20:00:06Z
---

# Provide a one‑year narrative of Larsen & Toubro, outlining how business performance, market conditions, and company actions shaped investor sentiment and valuation.

# Larsen & Toubro — One-Year Narrative (June 2025 → May 2026)

L&T's last twelve months can be read as a story in two acts: a victory-lap close to FY25 (March-end fiscal) that left CLSA's house view firmly constructive, followed by a tougher FY26 in which Middle East disruptions, decelerating prospects and missed FY26 guidance triggered the first material sell-side derating in years. The order book kept compounding throughout; the multiple did not.

---

## 1. Setup — exiting FY25 on a high (May 2025)

L&T closed FY25 (year-ended March 2025) by beating three of its four guidance lines for the third consecutive year — order inflows +20% YoY (vs guidance +10%), execution +18% (vs +15%), and a flat-to-+10bps margin print versus a guidance of flat — while delivering its first proper E&C margin expansion in five years [3]. Engineering & Construction Ebitda margin rose 15bps to 8.3% for the year, infrastructure margin troughed and turned (+23bps in FY25), and the realty segment posted 48.4% margins on Powai West deliveries [3].

CLSA's analyst Bharat Parekh issued the 8-May-2025 result note titled "Guidance surprise," maintaining **Outperform** with a target price of **Rs4,176** against a then-prevailing price of Rs3,066 (an implied +26% upside on a 12-month basis) [20]. Modeled FY25 ROE printed at 16.3%, up 140bps YoY (a 12-year high), and was modeled to step further to 18.2% in FY25CL and 19.3% in FY26CL [3].

The bigger market-mover that day was **FY26 guidance**: management guided inflows +10%, execution +15%, and (the surprise) +20bps core E&C margin expansion on top of a US$221bn prospects pipeline — up an aggressive **57% YoY** [1][2]. CLSA flagged the pipeline number as "optimistic … especially with the perception of a slowing Middle East" but argued the +20bps could prove conservative on lower legacy orders, lower base, backlog maturity and benign materials [1][3].

---

## 2. The marquee orders that built the bull case (mid-2024 → 1H 2025)

The twelve-month narrative was anchored by three trophy wins that progressively re-rated L&T from "India domestic E&C compounder" to "global energy EPC heavyweight":

| Date | Order | Value | Read-through |
|------|-------|-------|---------------|
| Oct 2024 | India power equipment (lowest bidder) | ~US$3–4bn tender | First validation of L&T's re-entry into thermal cap-goods after years of attrition |
| Nov 2024 | NTPC thermal package | **US$2.8bn** | L&T's biggest-ever power-equipment order; 9% of FY25CL inflows, 16% of 2H asking rate; unlocked a US$30-35bn thermal-equipment opportunity to FY30 |
| Mar 2025 | QatarEnergy LNG NFPS COMP 4 | **US$4bn+** | Largest single contract in L&T's history; added 6.6% to total backlog and 25.4% to hydrocarbon backlog |

The QatarEnergy NFPS COMP 4 award in particular reframed the franchise. CLSA called it the order that "clearly takes L&T into the big leagues of global EPC handling multi-billion US dollar contracts," noting that hydrocarbon margins are above L&T's blended average and that offshore work earns a premium to onshore Middle-East scope [6]. Saipem had won the parallel COMP 3A/3B packages a year earlier, so this win was as much about market-share take as it was about pipeline build.

By March 2025, energy had quietly grown to ~50% of backlog — split between higher-margin gas/LNG and lower-margin variable renewable contracts (ACWA Uzbekistan solar+BESS, Masdar solar+BESS, Saudi Arabia ±500kV HVDC transmission) — with CLSA arguing this blend "could encourage India & global energy-focused funds to consider L&T as a core holding despite it not being in their benchmark indices" [7].

3QFY25 (Jan-2025 release) was the cleanest expression of this momentum: 3Q E&C inflows came in at Rs987bn vs CLSA's Rs650bn estimate, growth of **64% YoY**, "led by marquee orders in India led by Modi 3.0's push for capex at CPSEs and ME [orders]" [4][5]. Backlog was Rs5.1tn (+20% YoY) and ROE rose another 90bps to 16.1% — a 12-year high at that point [22]. The thermal "carbonlite" sub-vertical alone accounted for 9% of backlog, with CLSA expecting "large orders in FY26-27 as well, as India finishes ordering of 80GW" [23].

---

## 3. Market and macro backdrop

Three macro vectors set the contextual frame for the year:

- **Modi 3.0 capex acceleration.** Capex Insights #63 (May-2025) and #65 (Jun-2025) flagged "Modi 3.0 capex set to surprise," with L&T tagged in CLSA's primary tickers list as the leveraged play. India's domestic share of L&T's backlog rose from 39% in 3QFY24 to **58% in 3QFY25** — a sharp domestic mix shift — before international wins (Qatar) brought balance back to 46% domestic / 52% international by FY26-end [12].
- **Middle East cross-currents.** Markets fretted through 1H FY26 about a slowdown at Aramco's oil capex. CLSA's stance was that L&T continues "with its gas capex, which it considers a transition fuel" [10][5]. By Q4 FY26, the Middle East had become a clear headwind — analysts later attributed FY26 misses to "ongoing Middle East (ME) disruptions" and "supply chain disruption in March" [11].
- **India's 80GW thermal plan and energy security.** With batteries not yet viable at grid scale, India reopened large thermal tenders — exactly L&T's reawakened franchise — even as the company also bid hard on renewables, green hydrogen and BESS. The "right balance of relatively higher margin, gas/LNG orders with relatively lower margin and variable renewable contracts" became the central margin thesis [7].

L&T was also a beneficiary of the FY26 Budget (Feb-2025) which CLSA tagged as "Striking the right balance," and was held up as the lead capex play across CLSA's India Strategy, Capex Insights and "Beautiful India" thematic series throughout the year.

---

## 4. Subsidiaries — quietly the swing factor

CLSA's 7-May-2025 "Subsidiaries deliver" note recapped a strong FY25 across the listed/unlisted asset stack — subsidiaries collectively contributing 31% of consolidated EPS [excluded SUMMARY chunk; covered in 4Q recap]. Per the same FY25 4Q deck:

- **L&T Finance Holdings (LTFH)** recurring PAT rose **+50% YoY** in FY25 (on top of +64% in FY24), driven by the rapid pivot from a low-ROA wholesale book to a retailised book.
- **Hyderabad Metro** narrowed losses by 24% YoY.
- **LTTS and LTIMindtree** were the soft spots — India's fifth-largest tech franchise, growing 11.7% YoY in 4QFY25 but seeing margin declines [19]. Tech-services Ebitda margin contracted 196bps to 18.3% for the year.

The CLSA SOTP put EPC at Rs3,068/sh (74% of value), listed subs LTIM + LTTS + LTFH together at Rs1,036/sh (25%), and dev/realty at Rs46/sh — arriving at the **Rs4,176 TP** [20].

---

## 5. Investor sentiment & valuation arc

Through most of the year the multiple was the bull point: L&T was modeled at ROE of 18.2% in FY25CL → 19.3% in FY26CL → 19.4% in FY27CL, with EPS CAGR of ~22% on E&C alone, while trading at a 5%-66% FY26 PE discount to capital-goods comps [2]. By the September 2024 CITIC CLSA India Forum, CLSA was already framing L&T as "relative value among India's industrial companies." The Mar-2025 "Understanding L&T #28" deep dive pushed the discount-to-comps argument harder, citing a 17-194% FY26 PE discount to peers [7].

Stock price progression (CLSA tape): the share traded in a Rs3,059-Rs3,948 band over the 12 months leading into the May-2025 print, with market cap at US$53.3bn, free float 86%, and SBI Mutual Fund / ICICI Prudential the two largest holders at 4.4% / 3.8% [20].

The bull case held through Q3 FY26. Then Q4 FY26 broke it.

---

## 6. The Q4 FY26 reset (May 2026) — narrative pivots

L&T reported FY26 4Q on **5-May-2026** and the print was mixed, with revenue, EBITDA margin and PAT all missing StreetAccount but order intake beating handily:

| Metric | 4Q FY26 | vs SA cons | YoY |
|--------|---------|------------|-----|
| Revenue | INR 827.62bn | (2.0%) miss | +11% |
| EBITDA margin | 10.4% | (40bps) miss | +100bps |
| PAT (attributable) | INR 53.26bn | (4.8%) miss | — |
| Order inflow (total) | INR 897.72bn | **+12.5% beat** | flat |
| Total order book | **INR 7.403tn** | beat (SA 7.221tn) | — |
| Final DPS | INR 38 | — | — |

[15][16]

International orders were 67% of Q4 inflows and 52% of the order book (up from 46% YoY) — a clear continuation of the Middle East thrust [16]. By segment, Energy Projects revenue jumped +35.5% YoY but margin compressed sharply to 6.5% from 8.2% (the "cost jobs" phase CLSA had flagged from FY25). Hi-Tech Manufacturing margin fell to 17.9% from 19.5%, while Financial Services margin spiked to 24.4% from 10.2% [16].

Critically, **FY26 full-year missed guidance** on the two narrative-defining lines: revenue +11% vs guided +15%, and ROE 16.6% vs guided ~18% (a 140bps miss) [11]. The miss was attributed to "weak execution in domestic water, infra projects, supply chain disruption in March, set off by strong execution in ME energy" [11].

### Broker reaction (5–6 May 2026)

The stock fell **2.9% on result day** to INR 3,940 and was downgraded by a cluster of brokers within 24 hours [18]:

- **Nomura**: Downgraded to Neutral from Buy; TP cut to **INR 3,940** from INR 4,510 — citing "commodity driven retendering delays," a (6%) YoY pipeline contraction, RoE volatility from new segments, and difficulty justifying current multiples [13][11]
- **DAM Capital**: Neutral from Buy; TP INR 4,100
- **ICICI Securities**: Add from Buy; TP cut to **INR 4,300** from INR 5,000
- **Emkay Research**: Add from Buy; TP cut to INR 4,450 from INR 4,800
- **HSBC**: TP cut materially (Buy maintained); flagged "structurally lower margins in hydrocarbons, heavy engineering" and ROE volatility [11]

Against this wave, **IIFL upgraded to Buy** from Add (TP raised to **INR 4,727** from INR 4,338) [14], and **CLSA's Bharat Parekh maintained Outperform with a raised target of INR 4,842** — arguing strong Q4 inflows, NWC efficiencies, the FY27E guide being "dependent on SoH normalization by Q1," and constructive exposure to EMS, data centers, AI and green tech as the differentiated bull case [11].

A week later (15-May-2026), **InCred Equities** went a step further with a Reduce rating and INR 3,550 TP (10% downside) [17], underscoring that the divergence in views had widened materially.

### What the bears focused on
- **Deceleration in the 5-year (FY26-31E) plan** vs the prior 5-year plan
- **ROE targets held at current 16.6% level** despite the exit from non-core (Hyderabad Metro, Nabha Power), implying capital deployment in EMS, data centers, green hydrogen is **margin-dilutive at the consolidated level**
- **FY27E pipeline only ~6% YoY** — narrow and dependent on Middle-East SoH (state of hostilities) normalising by Q1 [11]
- **High base** from FY25-26 making +10-12% inflows guidance for FY27 vulnerable

### What the bulls focused on
- INR 7.4tn order book providing multi-year revenue visibility
- ME rebuild TAM of **US$30-50bn** flagged by JPMorgan and HSBC [11]
- Rising local Indian private capex mix
- Imminent exit from Hyderabad Metro and Nabha Power (cleaning consolidated ROE)
- Strategic positioning in EMS, data centers, AI, green tech

### Other corporate actions in the result window
- **5-May-2026**: P. Ramakrishnan appointed CFO, effective **1-Jul-2026** [27 — see Sources]
- **6-May-2026**: L&T's Minerals & Metals business won a **"mega order"** (defined as INR 100-150bn) from JSW Steel for blast furnaces and steel melt shops at Ballari (Karnataka) and Paradip (Odisha) — a notable diversification beyond hydrocarbon mega-deals into Indian private steel capex [15]
- **7-May-2026**: Buildings & Factories business won three orders including high-rise residential towers and a luxury hotel in Karnataka
- **14-May-2026**: FY26 annual report released

---

## 7. Synthesising the arc

The one-year story is a textbook case of **narrative-vs-numbers divergence in a long-cycle EPC stock**. For most of the year, the order book and prospects-pipeline narrative drove the multiple — Qatar, NTPC, Saudi T&D, Masdar wins each reinforced the "global energy EPC" re-rating thesis. CLSA's anchor view (Outperform, Rs4,176 TP at May 2025 → Rs4,842 at May 2026) embodied this trajectory.

But the underlying numbers diverged: ROE plateaued (FY26 16.6% vs guidance ~18%), revenue execution slipped on supply-chain and ME logistics frictions, and the FY27E pipeline expanded only 6% YoY against a high base. The Q4 FY26 print converted what had been latent concerns into explicit downgrades, and consensus broke into two camps — those (Nomura, InCred, DAM, ICICI, Emkay, HSBC) emphasising that the new five-year plan **decelerates growth and dilutes ROE**, vs those (CLSA, IIFL, JPMorgan) arguing that the **order book and rebuild TAM** justify looking through one to two transition years.

The stock therefore ends the window broadly flat to mildly down (INR ~3,940 vs the 12-month high of INR 3,948 from the prior year), even as the order book grew to a record INR 7.4tn and energy crossed 50% of backlog — a textbook reminder that in long-cycle EPC franchises, **multiple compression often comes precisely when the order book is at peak visibility**, because the marginal investor is now underwriting margin trajectory, not order intake.

---

## Sources

[1] Larsen & Toubro - O-PF (Guidance surprise) — CLSA (8 May 2025) — 607958683LinqAlpha.PDF
[2] Larsen & Toubro - O-PF (Guidance surprise) — CLSA (8 May 2025) — 607958683LinqAlpha.PDF
[3] Larsen & Toubro - O-PF (Guidance surprise) — CLSA (8 May 2025) — 607958683LinqAlpha.PDF
[4] Larsen & Toubro - O-PF (Beat, beat, beat) — CLSA (31 Jan 2025) — 607949334LinqAlpha.PDF
[5] Larsen & Toubro - O-PF (Beat, beat, beat) — CLSA (31 Jan 2025) — 607949334LinqAlpha.PDF
[6] Larsen & Toubro - O-PF (Biggest order ever) — CLSA (26 Mar 2025) — 607954147LinqAlpha.PDF
[7] Larsen & Toubro - O-PF (Understanding L&T #28) — CLSA (28 Mar 2025) — 607954265LinqAlpha.PDF
[8] Larsen & Toubro - O-PF (Surprise quarter, 2QFY25) — CLSA (30 Oct 2024) — 607942696LinqAlpha.PDF
[9] Larsen & Toubro - O-PF (Surprise quarter, 2QFY25) — CLSA (30 Oct 2024) — 607942696LinqAlpha.PDF
[10] Larsen & Toubro - O-PF (Guidance surprise) — CLSA (8 May 2025) — 607958683LinqAlpha.PDF (Qatar/Aramco read-through)
[11] Street Takeaways - L&T Q4 Earnings — StreetAccount (7 May 2026)
[12] Larsen & Toubro - O-PF (Beat, beat, beat) — CLSA (31 Jan 2025) — 607949334LinqAlpha.PDF
[13] L&T downgraded to Neutral from Buy at Nomura — StreetAccount (6 May 2026)
[14] L&T upgraded to Buy from Add at IIFL Securities — StreetAccount (6 May 2026)
[15] L&T Minerals & Metals secures mega order from JSW Steel — StreetAccount (6 May 2026)
[16] StreetAccount Metrics Recap - L&T Q4 FY26 Earnings — StreetAccount (5 May 2026)
[17] InCred Equities downgrades Larsen & Toubro — StreetAccount (15 May 2026)
[18] StreetAccount Trading higher/lower: India mid-day — StreetAccount (6 May 2026)
[19] Larsen & Toubro - O-PF (Guidance surprise) — CLSA (8 May 2025) — 607958683LinqAlpha.PDF
[20] Larsen & Toubro - O-PF (Guidance surprise) — CLSA (8 May 2025) — 607958683LinqAlpha.PDF (cover page metrics)
[21] Larsen & Toubro - O-PF (Guidance surprise) — CLSA (8 May 2025) — 607958683LinqAlpha.PDF (4QFY25 segmentals)
[22] Larsen & Toubro - O-PF (Beat, beat, beat) — CLSA (31 Jan 2025) — 607949334LinqAlpha.PDF (3Q ROE)
[23] Larsen & Toubro - O-PF (Understanding L&T #28) — CLSA (28 Mar 2025) — 607954265LinqAlpha.PDF (carbonlite, 80GW)
[27] Larsen & Toubro appoints P. Ramakrishnan as CFO — StreetAccount (5 May 2026)

**Note on coverage window**: CLSA RMS coverage in this workspace ends late June 2025 (latest published_date = 29-Jun-2025); the FY26 narrative arc through May 2026 is sourced from FactSet StreetAccount, which extends to the present.

## Citations

- [11] **Street Takeaways - Larsen & Toubro Q4 Earnings (INR 4008.35, 0.00)** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4661552&_doc_date=2026-05-07&_doc_product=SA>
- [12] **StreetAccount Metrics Recap - Larsen & Toubro Q4 Earnings** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4657865&_doc_date=2026-05-05&_doc_product=SA>
- [13] **Larsen & Toubro downgraded to neutral from buy at Nomura** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4660145&_doc_date=2026-05-06&_doc_product=SA>
- [14] **Larsen & Toubro upgraded to buy from add at IIFL Securities** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4660382&_doc_date=2026-05-06&_doc_product=SA>
- [15] **L&T Minerals & Metals business secures mega order from JSW Steel** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4660148&_doc_date=2026-05-06&_doc_product=SA>
- [16] **Larsen & Toubro appoints P. Ramakrishnan as CFO** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4658945&_doc_date=2026-05-05&_doc_product=SA>
- [17] **InCred Equities upgrades NCC Ltd; downgrades Larsen & Toubro** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4682060&_doc_date=2026-05-15&_doc_product=SA>
- [18] **StreetAccount Summary - Trading higher/lower: India mid-day** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4660387&_doc_date=2026-05-06&_doc_product=SA>

