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On Friday, UBS analyst Amit Mahawar maintained a Neutral rating on Larsen & Toubro (NSE:LART) Ltd. (LT:IN) (OTC: LTOUF), with a steady price target of INR 4,000.00. Mahawar acknowledged the company’s strong order growth and healthy execution rate despite a miss on core EBITDA. He pointed out that L&T has been consistently performing well in execution, order acquisition, and net working capital management, although core margins have been lower than expected, which now appears to be a recurring trend in recent quarters.
Mahawar updated the forecasts for Larsen & Toubro’s core orders for financial years 2025 and 2026, increasing them by 17% and 11% respectively. This revision was based on the company’s robust performance in the first nine months of the fiscal year, which included significant wins. Despite these positive developments, the UBS analyst decided to retain the Neutral rating.
The price target is derived from a sum-of-the-parts (SoTP) valuation, applying a 25 times multiple to the core 12-month forward price-to-earnings (PE). Mahawar mentioned that the price target reflects limited potential for margin improvement and an increased mix of non-domestic core orders.
Larsen & Toubro’s performance has been noted for its impressive order book growth, which is an important indicator of future revenue potential. However, the analyst’s comments suggest a cautious stance on the stock, emphasizing the need for margin improvements to drive a more positive outlook.
Investors and market watchers may find the UBS analyst’s reiteration of the Neutral rating and price target of INR 4,000.00 for Larsen & Toubro of interest, as it reflects a balanced view of the company’s operational strengths and the challenges it faces in improving core profit margins.
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