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On Friday, Goldman Sachs updated its outlook on Larsen & Toubro (NSE:LART) Ltd. (LT:IN) (OTC: LTOUF), adjusting the price target to INR3,920 from the previous INR3,960. Despite this change, the firm maintains a Buy rating on the stock. Stifel analysts highlighted the company’s robust core order inflow, which saw a significant increase of 64%, propelled by substantial growth in both domestic (over 135%) and international (over 25%) markets. This performance has positioned Larsen & Toubro to potentially achieve more than 15% growth in core order inflow for the fiscal year 2025.
The company’s revenues climbed by 20%, and EBITDA margins remained steady at 7.6%, consistent with year-over-year and quarter-over-quarter figures. Goldman Sachs’ analysts noted that Larsen & Toubro’s prospect base for the fourth quarter stands at around Rs5.5 trillion, indicating a strong position for the company moving forward.
Although consolidated margins and profit after tax (PAT) did not meet expectations, the shortfall was attributed to weaker margins in IT subsidiaries and the faster growth of the core business, which has lower margins compared to the IT segment. However, the analysts emphasized the strong core order inflow and execution, coupled with a substantial improvement in working capital.
The research firm anticipates that as Larsen & Toubro shifts its execution mix towards domestic projects, margins should gradually improve. This expectation is based on the current trajectory of the company’s core business and its potential for sustained double-digit revenue growth over the medium term. Goldman Sachs’ revised 12-month target price reflects these factors while continuing to recommend the stock as a Buy.
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