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On Thursday, HSBC downgraded Larsen & Toubro Ltd. (LT:IN) (OTC: LTOUF) from "Buy" to "Hold," adjusting the price target to INR3,500 from INR3,900. The firm cited multiple factors contributing to near-term order inflow pressures for the infrastructure giant.
These factors include a high base of order inflows from the international segment, recent losses of significant hydrocarbon segment orders, and a weak order prospect pipeline in the domestic infrastructure segment.
Additionally, the busy election season and missed opportunities in domestic power capital expenditures due to competitive pressures and lack of participation were mentioned as contributing to the negative outlook.
The analyst from HSBC noted that despite expectations of strong order inflow growth in the domestic market, it is likely to be offset by weakness in international markets. As a result, Larsen & Toubro is projected to experience flattish order inflow growth in the remaining three quarters of the fiscal year 2025. In contrast to the management's guidance of 10% growth, HSBC anticipates a modest 2% growth in order inflows for the company in FY25.
The moderate growth expectation of 2% is set against a backdrop of a robust ~30% growth in FY24, underscoring the significant slowdown anticipated by HSBC. The analyst's statement reflects concerns over the company's performance in the face of a challenging environment, both domestically and internationally.
Larsen & Toubro's performance in the fiscal year 2025 is now under closer scrutiny by investors following the downgrade. The stock's new price target and hold rating reflect HSBC's revised expectations for the company's order inflow growth and overall performance in the near term.
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