L&T Shares Slide 4% After Q4 Profit Dip. Why Jefferies, Goldman Sachs Are Still Bullish
Shares of Larsen and Toubro (L&T) dropped nearly 4% in early trading on Monday after the infrastructure giant reported a 3% year-on-year decline in its net profit for the fourth quarter. The company posted a net profit of Rs 5,326 crore for the January-March period, compared to Rs 5,497 crore in the same quarter last year. This profit dip surprised many investors who were expecting stronger earnings from India’s largest engineering and construction firm.
However, a closer look at the numbers reveals a more nuanced picture. While profit slipped, the company’s revenue from operations jumped 11% to Rs 82,762 crore. This growth was driven by strong execution of large infrastructure projects across roads, metro systems, and power plants. International business now contributes more than half of L&T’s total revenue, highlighting its expanding global footprint in markets like the Middle East, Africa, and Southeast Asia.
Operational Strength Beneath the Surface
Despite the profit decline, L&T’s EBITDA (earnings before interest, taxes, depreciation, and amortization) grew 5% to Rs 10,500 crore. This indicates that the company’s core engineering and services segments are performing well. The EBITDA margin remained stable at around 12.7%, showing that operational efficiency has not been compromised. The profit dip was largely due to higher depreciation charges and increased tax expenses, not a deterioration in business fundamentals.
For example, L&T’s order book at the end of March stood at a record Rs 4.8 lakh crore, providing strong revenue visibility for the next two to three years. New orders worth Rs 1.1 lakh crore were secured during the quarter, with major wins in the hydrocarbon and power transmission sectors. This pipeline of work gives the company a solid foundation for future growth.
Why Global Brokerages Remain Bullish
Despite the near-term profit miss, top global brokerages like Jefferies and Goldman Sachs have maintained their positive stance on L&T. Jefferies has a “buy” rating with a target price of Rs 4,100, implying a potential upside of over 20% from current levels. The brokerage believes the profit dip is temporary and that the company’s strong order inflow and execution momentum will drive earnings recovery in the coming quarters.
Goldman Sachs is equally optimistic, citing L&T’s leadership in India’s infrastructure boom. The government’s increased spending on roads, railways, and renewable energy projects is expected to benefit the company directly. Goldman also highlights L&T’s growing presence in the green energy space, including solar and wind power projects, as a key growth driver.
What Investors Should Watch
For long-term investors, the key takeaway is that L&T’s core business remains healthy. The profit dip was a one-off event caused by higher costs, not a sign of weakness. The company’s revenue growth, expanding international operations, and record order book all point to a strong future. Investors should focus on the company’s ability to convert its massive order book into revenue over the next few years.
However, near-term volatility cannot be ruled out. The stock may remain under pressure until the next quarterly results show a clear recovery in profits. Investors with a long-term horizon could use any further dips as buying opportunities, given the company’s dominant position in India’s infrastructure sector and its expanding global reach.
In summary, while L&T’s Q4 profit dip caused a knee-jerk reaction in the stock market, the underlying business fundamentals remain robust. The bullish views from Jefferies and Goldman Sachs suggest that the current weakness may be temporary. For those willing to look beyond short-term fluctuations, L&T still offers a compelling investment case tied to India’s infrastructure growth story.
