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Cost overruns in legacy hydrocarbon projects
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Larsen & Toubro Limited — Q2 FY26
L&T reported a strong Q2 FY26 with group revenues of INR 68,000 crore (+10% YoY) and PAT of INR 3,900 crore (+16% YoY).
bullish
high
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L&T reported a strong Q2 FY26 with group revenues of INR 68,000 crore (+10% YoY) and PAT of INR 3,900 crore (+16% YoY). Order inflows surged 45% YoY to INR 1,158 billion, driven by ultra-mega hydrocarbon orders in the Middle East and robust domestic private sector demand. The order book reached a record INR 6.67 trillion (+31% YoY), providing strong revenue visibility. EBITDA margin for P&M improved to 7.8% (+20bps YoY), while group EBITDA margin dipped to 10% due to IT&TS compression. Management maintained FY26 guidance of 15% revenue growth and 8.5% P&M EBITDA margin, expressing confidence in exceeding order inflow guidance. Key risks include cost overruns in legacy hydrocarbon projects and slower execution in water infrastructure due to payment delays.
एलएंडटी ने वित्त वर्ष 2026 की दूसरी तिमाही में मजबूत प्रदर्शन किया। कंपनी की कुल कमाई 68,000 करोड़ रुपये रही, जो पिछले साल से 10% ज्यादा है। मुनाफा 3,900 करोड़ रुपये रहा, जो 16% बढ़ा। कंपनी को मिडिल ईस्ट में बड़े तेल-गैस ऑर्डर और देश में निजी क्षेत्र की मांग से 45% ज्यादा ऑर्डर मिले। कुल ऑर्डर बुक 6.67 लाख करोड़ रुपये का रिकॉर्ड स्तर पर पहुंच गया, जिससे आने वाले समय में कमाई सुनिश्चित है। मुनाफा मार्जिन 7.8% रहा, लेकिन आईटी कारोबार में कमी से कुल मार्जिन 10% पर आ गया। कंपनी को उम्मीद है कि इस साल कमाई 15% और मार्जिन 8.5% रहेगा। जोखिमों में पुराने तेल-गैस प्रोजेक्ट्स में लागत बढ़ना और पानी के कामों में भुगतान में देरी शामिल है।
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Order Inflows
INR 1,158 billion
+45% YoY
Strong ordering activity across India and Middle East, with P&M portfolio up 54% YoY.
Order Book
INR 6.67 trillion
+31% YoY
Record order book providing ~3 years of revenue visibility, with balanced domestic/international mix.
Prospects Pipeline
INR 10.4 trillion
+29% YoY
Strong pipeline led by Infrastructure (INR 6.50T) and Hydrocarbon (INR 2.93T) segments.
Net Working Capital to Revenue
10.2%
-200bps YoY
Improved working capital efficiency driven by strong customer collections and execution discipline.
What Changed vs Last Quarter
NEW
FY26 working capital guidance unchanged at ~12%
Net working capital to revenue ratio is expected to be around 12% by March 2026, unchanged from prior guidance.
UPDATED
FY26 order inflow growth to exceed 10% guidance
Management is confident of exceeding the full-year guidance of 10% growth in group order inflows, citing strong H1 momentum and robust prospects pipeline.
UPDATED
FY26 revenue growth guidance maintained at 15%
Group revenue growth guidance of 15% for FY26 is maintained, with stronger H2 execution expected.
UPDATED
FY26 P&M EBITDA margin target of 8.5%
Management is reasonably confident of achieving the full-year P&M EBITDA margin target of 8.5%, with H1 margin at 8.4% and H2 execution pickup expected.
DROPPED
Net working capital to revenue guidance of 12% for March 2026
Net working capital to revenue ratio is expected to be 12% as of March 2026.
NEW RISK
Cost overruns in legacy hydrocarbon projects
Energy segment margins declined to 7.3% due to cost overruns in a few domestic and international projects nearing completion. Management expects soft margins to persist in the near term.
NEW RISK
Margin pressure from IT&TS segment
Group EBITDA margin declined 30bps YoY primarily due to margin compression in IT&TS segment, which could persist if demand environment remains challenging.
RISK GONE
Hydrocarbon margin pressure from competitive jobs
Execution ramp-up in competitively priced hydrocarbon jobs awarded in 2021-22 may keep margins subdued in H1 FY26.
RISK GONE
Labor churn impacting project execution
High labor turnover (every three months) at construction sites leads to retraining costs and potential delays.
🤫 Topics management stopped discussing
Mentioned in Q1 FY25, Q1 FY26, Q2 FY25, Q3 FY25, Q4 FY25
Products and manufacturing portfolio EBITDA margin is targeted in the 8.3%-8.5% range for the full year.
Mentioned in Q1 FY26, Q2 FY25, Q3 FY25
Net working capital to revenue ratio is expected to be 12% as of March 2026.
Mentioned in Q1 FY25, Q4 FY25
Capital expenditure for the year expected to be around ₹4,000 crore, in line with previous guidance.
Mentioned in Q1 FY25, Q4 FY25
The prospects pipeline fell 10% YoY to ₹9.07 trillion, primarily due to a decline in hydrocarbon prospects, partly from Saudi Aramco's CapEx deferrals.
Mentioned in Q1 FY25, Q2 FY25
Large hydrocarbon projects in the Middle East are fixed-price; any delay could compress margins.
Fast read
Guidance and risk preview
Management is confident of exceeding the full-year guidance of 10% growth in group order inflows, citing strong H1 momentum and robust prospects pi...
Energy segment margins declined to 7.3% due to cost overruns in a few domestic and international projects nearing completion.
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