Larsen & Toubro order inflows accelerate despite West Asia execution disruption
Larsen & Toubro Ltd.
Buy
₹3,702
₹3,629.9
₹4,400
18.85%
Investment View and Valuation
Motilal Oswal’s October 7, 2026 company update on Larsen & Toubro reiterates a Buy recommendation. The view is supported by sharply improving order inflows across domestic and international markets, despite disruption to some Middle East project execution caused by the West Asia crisis.
The broker’s target price is Rs 4,400, based on a sum-of-the-parts valuation. The core business is valued at 25 times December 2028 estimated earnings, with a 25 per cent holding-company discount applied to subsidiaries.
Order Book and Inflow Momentum
L&T had an order book of Rs 7.8 trillion as of June 2026 and a prospect pipeline of Rs 15 trillion for 9MFY27, split equally between domestic and international opportunities. Motilal Oswal expects core engineering and construction order inflow and revenue to grow at compound annual rates of 10 per cent and 14 per cent, respectively, over FY26 to FY29.
Actual inflows stood at Rs 873 billion in Q1 FY27. L&T subsequently announced around Rs 1.3 trillion of orders in Q2 FY27, of which more than Rs 775 billion came from the Middle East. These orders span hydrocarbon, offshore, infrastructure, gas-compression plant and battery energy storage system projects.
Domestic Q2 FY27 announcements include NTPC and DVC thermal-power projects, ONGC platform and pipeline projects, and a mega order from NVIDIA to build India’s largest NVIDIA B300 AI factory. The announced order run rate in the first half of FY27 was around Rs 2 trillion.
| Order inflow metric | Amount |
|---|---|
| Q1 FY27 actual inflows | Rs 873 billion |
| Q2 FY27 announced orders | Around Rs 1.3 trillion |
| Middle East share of Q2 FY27 announced orders | More than Rs 775 billion |
| FY27E order inflow | Rs 3.8 trillion |
| FY28E order inflow | Rs 4.3 trillion |
Domestic and International Opportunity Pipeline
Management is optimistic about continuity of inflows from domestic private-sector activity, including semiconductor plants, data centres, real estate, and ferrous and non-ferrous industries. L&T has five thermal-power projects in its order book from NTPC, Adani Power, Torrent Power, NTPC Lara and DVC. These projects are expected to ramp up in execution over the coming quarters and years.
The company is also pursuing further thermal-power projects, possible defence orders including the first batch of 59 Zorawar tanks and NGC, and nuclear opportunities. L&T expects nuclear-related inflows to rise as India’s nuclear capacity target increases from 8.9 GW currently to 22.5 GW by FY32 and ultimately 100 GW by FY47.
Internationally, L&T has diversified order opportunities beyond the Middle East to Europe, Africa and Canada, while targeting North Asia, South Korea, Japan and Taiwan. Management views hydrocarbon spending as the principal Middle East ordering driver, followed by power, battery energy storage systems and core infrastructure.
L&T has historically maintained more than 20 per cent market share of its prospect pipeline. Motilal Oswal estimates that a 20 per cent share of the Rs 15 trillion 9MFY27 pipeline, together with Rs 873 billion received in Q1 FY27, supports its FY27E inflow expectation. The broker expects higher win rates in domestic thermal-power and defence prospects.
Building Wealth Through Established Businesses
Large-cap companies often form the foundation of a resilient portfolio. DSIJ's Large Rhino focuses on fundamentally strong businesses selected through detailed research for long-term investors.
Execution Outlook and Near-Term Constraints
Execution remains a key focus and a near-term constraint. The West Asia crisis has softened execution on Middle East onshore, hydrocarbon and solar projects and raised logistics costs. L&T aims to pass on higher logistics costs to clients.
The closure of the Strait of Hormuz has had a greater effect in Qatar and Kuwait because alternate routes are limited. Modular fabrication for a large Qatar order is occurring in India and is expected to be transported through the Strait of Hormuz by Q4 FY27. Modular fabrication for a large Tennet order is also planned in India.
Domestic execution is expected to strengthen through private projects, thermal power, and buildings and factories.
Financial Outlook
Motilal Oswal forecasts compound annual growth from FY26 to FY29 of 10 per cent in core engineering and construction order inflow, 14 per cent in revenue, 16 per cent in EBITDA and 17 per cent in profit after tax.
| Metric | FY26–FY29 CAGR | FY27E estimate |
|---|---|---|
| Core engineering and construction order inflow | 10 per cent | — |
| Revenue | 14 per cent | Net sales of Rs 3,140.5 billion |
| EBITDA | 16 per cent | Rs 321.5 billion |
| Profit after tax | 17 per cent | Rs 201 billion |
Key Risks
- Prolonged West Asia disruption or continued blockage of the Strait of Hormuz.
- Weaker order inflows.
- Delays in mega projects.
- Higher commodity prices.
- Increased working capital requirements.
- Stronger competition.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
