Analysts React as L&T Share Price Targets Cut: Margin Guidance Disappoints Investors

At least four analysts have slashed their price targets for Larsen & Toubro Ltd. (L&T) following the release of its March quarter results. The main reason behind this downward revision is the company's margin guidance, which has disappointed investors. However, despite the reduction in price targets, the majority of analysts still recommend buying L&T's stocks. Let's dive deeper into the reactions from various brokerage firms.

Analyst Reactions

Among the analysts covering L&T, 31 out of 36 have reiterated their "buy" recommendation for the stock. Three analysts suggest holding the stock, while two have issued a "sell" rating. For the financial year 2025, L&T anticipates a 10% increase in order wins compared to the previous year and a 15% growth in topline revenue. However, the company's margin guidance of 8.25% for 2025 fell short of analysts' expectations, which ranged from 9% to 9.5%.

CLSA Stays Bullish

CLSA maintained its "buy" rating on L&T but revised its price target down to ₹4,151 from ₹4,260. The firm highlighted L&T's strong order inflow guidance and solid execution capabilities as positives. Even with a projected slowdown in Middle Eastern capital expenditures, the outlook for L&T remains positive, with a 24% year-on-year growth in its project pipeline.

Jefferies Sees Upside Potential

Jefferies also kept its "buy" rating on L&T while lowering its price target to ₹3,970 from ₹4,135. The brokerage pointed out the potential for upside surprises due to L&T's robust prospect pipeline and the 10% increase in order inflow guidance. However, Jefferies expressed skepticism about the company's 15% revenue growth projection, considering its strong performance in the previous fiscal year.

Other Brokerages' Take

Morgan Stanley and Goldman Sachs both reduced their price targets on L&T but maintained a bullish stance on the stock. Morgan Stanley adjusted its target from ₹4,106 to ₹3,857, while Goldman Sachs lowered it to ₹3,600 from ₹3,900. Meanwhile, Bernstein retained its "outperform" rating and unchanged price target of ₹3,800. The firm expected higher margin guidance from L&T for the new fiscal year.

Overall, while the margin guidance provided by L&T for the financial year 2025 may have disappointed some analysts, the majority remain optimistic about the stock's prospects. With a solid order inflow outlook and a positive growth trajectory, L&T continues to be a favorable investment option for many analysts. The stock closed 1.6% higher on Wednesday, showcasing resilience amidst the market uncertainties. As investors navigate these developments, it will be interesting to see how L&T's performance unfolds in the coming months.