Why L&T Share Price is Rising

In recent weeks, we've been trying to cover in-depth editorials on retail favourite stocks (stocks with high non-institutional holding) and how they're placed for the next three years.

One stock that we wrote about and has stood out? Engineering behemoth Larsen & Toubro (L&T).

L&T is a name that needs no introduction in India's infrastructure and engineering landscape. The company, with decades of unmatched expertise, has become synonymous with innovation and resilience.

From pioneering large-scale projects to leading in green energy and technology, L&T continues to shape the future of India's industrial and economic growth.

In recent weeks, the company's stock price has shot up, pushing its valuation close to Rs 5 trillion in terms of market cap.

While its push into digital transformation and green energy has played a role, the company's core infrastructure transformation is the true catalyst.

The company recently bagged its largest ever order in history.

So, is this remarkable surge sustainable, or is it a case of inflated expectations?

Let's look at why L&T share price is rising and where the stock price is headed this year.

'Largest Ever Order'

The recent rally in L&T share price comes after the infra company informed exchanges that it has secured an ultra-mega offshore contract.

This project is for the "North Field Production Sustainability Offshore (Hydrocarbon) Compression (NFPS COMP 4)" from global premier LNG firm QatarEnergy.

This contract is worth over Rs 15,000 crore. It also marks L&T's largest ever single contract.

Prior to this, these were some of L&T's ultra-mega deals -

• October 2020: Constructing 237.1 km stretch MAHSR, estimated order worth Rs 20,000 crore.
• September 2023: Saudi Aramco's Jafurah unconventional gas production project valued at Rs 33,300 crore.
• November 2024: Thermal power plant order from NTPC estimated at Rs 22,000 crore.

To be sure, L&T bagging big orders is nothing new...

In recent months, the company has secured multiple significant contracts for infrastructure projects in India and international markets.

In India, the company was awarded a contract to build 765kV and 400kV transmission lines linked to a Renewable Energy Zone in Uttar Pradesh.

Internationally, L&T received an order in Saudi Arabia for a 380kV Gas Insulated Substation (GIS), which will include the installation of associated reactors and hybrid GIS bays.

In Abu Dhabi, the company has been contracted to develop a new 220/33kV grid station along with other related infrastructure.

The company also signed a contract with the Indian Army for the procurement of 223 Automatic Chemical Agent Detection and Alarm (ACADA) systems with at a cost of Rs 804 million, under the "Buy Indian" category.

Additionally, L&T's Buildings & Factories (B&F) vertical secured an order ranging between Rs 2,500 - Rs 5,000 crore from Brigade Group for residential and commercial projects in Hyderabad and Chennai.

Note that L&T holds an order book in excess of Rs 5.1 trillion (tn), equating to 2.5 times its annual revenues. The recently awarded ultra-mega order just adds to more revenue visibility and supports the company's growth in the coming years.

L&T has a prospect pipeline of Rs 8.1 trillion, and it expects a revival in domestic orders in the coming months.

Some of the key opportunities, totalling Rs 4.1 trillion, span areas such as data centers, healthcare, residential and industrial real estate, railways, expressways, airports, and hydropower projects.

Fundraising Lifts Sentiment

Apart from the recent order win, L&T shares have been on a tear following approval of a mega fundraising plan.

The company's board recently approved a fundraising plan of up to Rs 12,000 crore through various debt-based instruments.

When a company raises capital for expansion, acquisitions, or new projects, it indicates confidence in future growth.

Investors often see this as a positive sign.

Massive Growth Ahead

In the long run, L&T's strategy to expand extends beyond its core EPC businesses.

These include:

1. Nuclear Projects: L&T is enhancing its capabilities to capture opportunities in India's nuclear energy sector.
2. Green Energy: The company is preparing to scale its electrolyser manufacturing capacity to support renewable energy goals.
3. Semiconductor Design and Solutions: L&T is expanding its offerings in the semiconductor sector, aligning with India's high-tech manufacturing ambitions.
4. Data Centers: The company plans to expand its facilities beyond Mumbai and Chennai to meet rising demand for data storage.
5. Real Estate Development: With 60 million square feet of projects in the pipeline, L&T aims to grow its presence in this sector over the next few years.

The company is eyeing significant opportunities in the nuclear power sector, with expectations of an annual tendering potential of 2-3GW.

Additionally, L&T is cautiously optimistic about the thermal power sector, where approximately 80GW of capacity is expected to be added. The company plans to approach this market selectively, focusing on certain project segments through joint ventures.

Another promising area is defence, where L&T sees strong potential, fuelled by government initiatives to encourage private sector participation.

With its established track record, R&D investments and technical expertise, L&T is poised to capture opportunities in land-based weapon systems, naval ships, battle tanks, and mounted guns. It's positioning itself as a key player in the growing defence market.

What to Expect from L&T Q4 Results?

Following all these orders, investors are anticipating a healthy March 2025 quarter performance from L&T.

This quarter's revenue growth is expected to be supported by the heavy international order book and timely execution.

Overall, L&T's revenue growth could surpass its FY25 guidance of 15%, supported by stabilising commodity prices and the anticipated completion of legacy projects.

In the past 5 years, L&T sales and net profit have grown at a compounded annual growth rate (CAGR) of 10.3% and 10%, respectively.

Financial Snapshot

Rs m, consolidated	FY20	FY21	FY22	FY23	FY24
Net Sales	14,54,524	13,59,790	15,65,212	18,33,407	22,11,129
Growth (%)	-	-7%	15%	17%	21%
Operating Profit	2,71,627	2,71,997	2,68,981	3,02,254	3,39,278
OPM (%)	19%	20%	17%	16%	15%
Net Profit	95,490	1,15,829	86,693	1,04,707	1,30,591
Net Margin (%)	7%	9%	6%	6%	6%
ROE (%)	15.8	6.6	13.1	14.8	17.8
ROCE (%)	12.5	10	11.6	13	14.9
Dividend (Rs)	18	36	22	24	34
Debt to Equity (x)	2.1	1.8	1.5	1.3	1.3

Source: Equitymaster

Investors should keep a close watch on the guidance provided for the coming financial year and how L&T plans to extend beyond its core EPC business.

Ultimately, you should carefully evaluate the company's performance, business outlook, and corporate governance before considering an investment.

How L&T Share Price has Performed Recently

In the past 5 days, L&T share price has gained 5%.

In a month, the stock is up 10%.

L&T has a 52-week high of Rs 3,963 touched on 10 December 2024 and a 52-week low of Rs 3,141 touched on 28 February 2025.

In the past 1 year, L&T share price is down 5%.

Here's a table comparing L&T with its peers -

Comparative Analysis

Company	L&T	Kalpataru Projects	KEC International	NCC	RVNL
ROE (%)	17.8	10.5	8.8	11.6	19.7
ROCE (%)	14.9	16.1	16.5	22.4	18.5
Latest EPS (Rs)	101.3	30.8	17.1	12.8	6.2
TTM PE (x)	33.9	32.8	44.7	16.3	58.1
TTM Price to book (x)	5.1	2.7	3.9	1.9	8.3
Dividend yield (%)	1	0.8	0.5	1.1	0.6
Industry PE	25.9
Industry PB	3.9

Source: Equitymaster

For more details, check out L&T's financial factsheet.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...