Larsen & Toubro (LT IN) – Q1FY27 Result Update – Mixed Q1, Healthy inflows amid execution headwinds – BUY

We revise our EPS estimates by -2.2%/-0.3% for FY27E/FY28E factoring in impact on margins amid execution challenges in PPM. Larsen & Toubro (L&T) reported consolidated revenue growth of ~7.0% YoY, while EBITDA margin contracted by ~90bps YoY to ~9.0%, impacted by lower execution in the Projects, Products & Manufacturing (PPM) portfolio, supply chain disruptions arising from the Middle East conflict, higher ECL provisions and forex headwinds in the technology services business. Order inflow remained robust at ~Rs1.08tn (+14% YoY), driven by strong international awards, particularly ultra-mega offshore wind projects in Europe (Rs150bn+), taking the consolidated order book to a record ~Rs7.79tn (+27% YoY), with international projects contributing ~52% of the backlog and reinforcing long-term revenue visibility. While execution in the Infrastructure & Utilities and Energy Green segments was affected by logistics constraints in the GCC region, the Energy Conventional business continued to witness healthy execution despite deferred order awards. Meanwhile, the Manufacturing & Products and Technology Platforms & Services businesses delivered healthy growth supported by strong demand across precision engineering, electronics, construction equipment and IT services. Management highlighted that bidding activity remains robust across domestic and international markets with no project cancellations, while the opportunity pipeline remains healthy at ~Rs15tn, underpinning its confidence in achieving FY27 order inflow and revenue growth guidance of 10–12%, along with ~7.8% PPM EBITDA margins. With expectations of execution improving in H2FY27, a record order book, expanding offshore wind opportunities and disciplined capital allocation under Lakshya 2031, management remains confident of sustaining profitable growth over the medium term. We maintain ‘Buy’ rating and with a revised SoTP-derived TP of Rs4,425 (Rs4,632 earlier), valuing the core business at a P/E of 22.5x Mar’28E (22x Mar’28E earlier).