Analysts Slash L&T Share Price Targets as Margin Guidance Disappoints Investors”
At least four analysts who have coverage on Larsen & Toubro Ltd. (L&T) have cut their price targets for the stock after its March quarter results. The primary source of disappointment comes from the company’s margin guidance, which underwhelmed the street.
Despite the cuts in price targets, 31 out of the 36 analysts that have coverage on L&T have retained their “buy” recommendation on the stock. Three of them have a “hold” rating, while two of them have a “sell” call on the stock.
For financial year 2025, L&T expects to win 10% more orders than it did in financial year 2024. It also expects its topline to grow by 15% from the year gone by. However, the company guided for margins to be at 8.25% for financial year 2025. The guidance estimate among analysts ranged from 9% to 9.5% for the year.
Brokerage firm CLSA retained its “buy” rating on L&T but cut its price target to ₹4,151 from ₹4,260 earlier. It cited a big beat to the order inflow guidance as a key positive and also highlighted the company’s robust execution.
CLSA also said that L&T has an improving outlook with a 24% year-on-year growth in its pipeline, despite a likely slowdown in Middle Eastern capex.
Jefferies cut its price target on L&T to ₹3,970 from ₹4,135 earlier but also retained its “buy” rating on the stock. It said that the prospect pipeline for L&T gives scope for upside surprise potential for the management 10% order inflow guidance for the year.
However, the brokerage said that the company’s 15% revenue growth guidance appears low considering the orders it won in financial year 2024.
Some other brokerages who have cut their price targets on L&T include Morgan Stanley, who cut its target from ₹4,106 earlier to ₹3,857, while Goldman Sachs cut its price target to ₹3,600 from ₹3,900 earlier. However, both of them retained their bullish stance on the stock.
Bernstein has retained its “outperform” rating on the stock and kept its price target unchanged at ₹3,800. The brokerage had anticipated the management to guide for 9% margin in the new financial year, which turned out to be lower.
It also sees a risk to guidance given the elections and uncertainties in the middle east. It highlighted L&T’s strong working capital position as a key highlight for the quarter.
Citi mentioned that it is not “unduly concerned” by L&T’s flat margin guidance for the year. It termed the company’s guidance for financial year 2025 as “healthy.”
Shares of L&T ended 1.6% higher on Wednesday. For 2024, the stock is flat, down 1.2% so far.
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