Shares of Larsen & Toubro Ltd hit a record ₹4062.60 on Thursday following a strong show in the September quarter (Q2FY26). Remember, the first half is a seasonally weak period for India’s engineering, procurement and construction (EPC) major. But L&T managed to buck the trend, thanks to international energy and domestic defence projects.
Consolidated revenue increased 10% year-on-year in Q2FY26 to ₹67,984 crore, a tad below expectations, thanks to a 1% drop in its mainstay infrastructure segment. Extended monsoons, slow execution in water projects due to payment delays, and a general stage-of-execution driven slowdown weighed on the segment that accounted for almost half of the quarter’s total revenue. However, with 46% of the new order inflows going into infrastructure, growth is likely to pick up pace.
Until that materializes, the next largest segment—energy—and the high-margin segment—hi-tech , have picked up the slack. Energy grew 48% year-on-year, thanks to execution ramp-up in international hydrocarbon projects. Hi-tech grew 33%, aided by the government’s continued defence focus. Ultra-mega hydrocarbon orders won in the Middle East contributed to the 45% growth in order inflows to ₹1.16 trillion in Q2 and a ₹6.67 trillion order-book.
But the margin story was mixed last quarter. While core EPC Ebitda margin expanded by 20 bps to 7.8% despite cost overruns in the competitively priced hydrocarbon projects, and litigation-related provisioning in the Nabha Power project, consolidated Ebitda margin compressed 30 bps to 10% in Q2FY26, dragged down by IT services. However, thanks to lower interest rates and borrowings by the parent, finance costs declined 14%. Plus, efficient treasury management meant other income rose 26%, driving a large part of the 16% growth in profit after tax to ₹3,926 crore.
Promising prospects, but risks loom
As seasonal weakness subsides in the second half, the full fiscal numbers are likely to beat expectations. Order inflows growth can be expected to surpass the FY26 target of 10%, and the management has reaffirmed the year’s guidance for 15% revenue growth and 8.5% core EPC Ebitda margin.
L&T’s massive order book translates into a revenue visibility of almost three years. A strong prospect pipeline of ₹10.40 trillion, along with a decent expected win rate of 18-20%, should ensure that the order book doesn’t get drained out even as the company remains committed to doubling revenues every five years. New segments like real estate, , renewables and data centres, which have been cost-guzzlers so far, are likely to drive the next leg of growth. The easing of interest burden from a potential divestment of the Hyderabad metro project can support margins, but significant write-offs can rain on the parade.
The company has seen increasingly higher exposure to overseas projects. 59% of orders bagged during H1FY26 were international, taking L&T’s order book to an almost 50-50 domestic versus international split. Almost 85% of its international order book is from projects in the Middle East. While this has supported revenue growth in recent quarters amid weaker domestic growth, exposure to the Middle East introduces additional layers of volatility— geopolitical risks, and muted oil prices which can delay order wins and execution, even as competition-led pricing pressures can weigh on margins.
That said, L&T’s focus on gas, renewable energy and recurring maintenance capex can cushion some of the impact. A growing defence portfolio, and recent domestic order wins including Adani’s ₹23,000 crore power project, can also help diversify revenues. Reflecting these prospects, Motilal Oswal Financial Services has pegged the stock’s sum-of-the-parts target price at ₹4,500, reflecting over 10% upside from current levels.