Larsen & Toubro - Q4 FY2025-26 Earnings Analysis

Performance Highlights

Larsen & Toubro delivered FY26 consolidated revenues of ₹2,859 bn, up 12% YoY, while recurring PAT rose 18% to ₹172 bn, surpassing the Lakshya 26 targets set in FY21. Group order inflows reached a record ₹4,356 bn (+22% YoY), lifting the order book to an all-time high of ₹7,403 bn (+28% YoY), with international orders comprising 52% of the backlog. The single most powerful operating driver was the Energy Projects segment, where revenues surged 35% to ₹549 bn on strong hydrocarbon and CarbonLite Solutions execution, while Hi-Tech Manufacturing grew 46% to ₹141 bn; these gains were partially offset by subdued Infrastructure revenue growth of just 3%, constrained by domestic water project funding delays. IT & Technology Services held steady at 19.5% EBITDA margin on 12% revenue growth, and net working capital as a percentage of revenue reached a multi-year low of 4.1%, underscoring improved capital efficiency.

Management Outlook and Forward CatalystsManagement launched the Lakshya 31 five-year plan, targeting order inflow CAGR of 10–12%, revenue CAGR of 12–15%, and ROE of 16–17% through FY31, anchored by investments in data centers, green hydrogen, semiconductor design, and industrial electronics. The SPAs signed for divesting Nabha Power and Hyderabad Metro, expected to close by June 2026, signal the near-complete exit from the concessions portfolio and a sharpened focus on capital-efficient, return-accretive growth. The central investor debate for the coming quarters centres on whether Energy Projects margin—which compressed 170 basis points to 6.8% due to legacy hydrocarbon cost overruns—can recover as new, higher-quality orders enter execution, and whether new businesses like data centers and green hydrogen can scale meaningfully. Bulls will watch the ₹17.8 trillion addressable prospect pipeline for FY27 and L&T Finance's 20%-plus loan book CAGR target; bears will monitor infrastructure execution risk, PES order deferrals, and geopolitical headwinds affecting Middle East capex.