Larsen & Toubro’s (L&T) strong order-winning streak stood out as the key positive takeaway from its December quarter (Q3FY26) results. Order inflows in its core projects and manufacturing business rose 18% year-on-year to ₹1.16 trillion in Q3FY26 despite a high base last year.
The better-than-expected improvement in orders was led by the infrastructure segment, which secured high-value contracts in power transmission & distribution and renewables businesses in international markets. L&T’s prospect pipeline for the remainder of FY26 also rose 7% year-on-year to ₹5.9 trillion, spanning infrastructure, hydrocarbon, carbon and Hi-tech segments.
guidance confidence
With this momentum, L&T management is confident of exceeding its 10% year-on-year order inflow growth guidance for FY26, even as it faces some challenges in overseas markets.
During the earnings call, management said it expects the canceled Kuwait projects (estimated at over $4.5 billion), where L&T was L1 (lowest bidder), to be refloated sometime in CY26, with the company hopeful of winning some of these tenders.
L&T does not see any meaningful risk to ordering prospects in the Middle East as long as oil prices remain in the $60–65 per barrel range. Currently, 37% of its order backlog comes from the Middle East. However, BofA Securities cautioned that high Middle East concentration remains a key risk amid volatile crude prices and geopolitical uncertainty, which could cap stock re-rating despite strong earnings delivery.
For now, strong order wins are supporting investor sentiment, with the stock rising about 4% on Thursday.
With 9MFY26 order inflows at ₹3.46 trillion (up 30% year-on-year), JM Financial Institutional Securities estimates 24% order inflow growth for FY26. L&T’s consolidated order book rose 30% year-on-year to an all-time high of ₹7.3 trillion.
Execution gap
While strong order inflows improve revenue visibility, execution remains critical. L&T will need to accelerate delivery to meet its revenue growth guidance of 15%.
Execution in the core business has remained weak in recent quarters despite a strong order book. In Q3FY26, consolidated revenue at ₹71,400 crore and core revenue at ₹Rs 52,300 crore both missed analyst expectations.
The weakness was largely due to slower execution in domestic markets and infrastructure projects, especially water infrastructure, due to slower project progress and an extended monsoon until October. L&T also slowed execution in water projects due to payment-related issues.
With the monsoon largely behind, management expects execution to pick up in Q4FY26, which is typically a seasonally strong quarter.
Margin outlook
L&T reiterated its margin guidance at 8.5%. Core operating margin improved to 8.1%, as weak performance in the energy segment was offset by stronger performance in the ‘Others’ segment.
Margin pressure in select segments such as infrastructure and energy stems from legacy projects executed at lower margins, management said. These projects are expected to conclude over the next few quarters.
Although fixed-price contracts account for a higher share (55%) of the order book, management said it remains hedged against commodity price increases and currency fluctuations.
“We believe core operating margins have bottomed at around 8.2% and should sustain at ~8.3–8.5% alongside nearly 15% revenue growth through FY27E–28E as more projects reach margin milestones,” said a Nuvama Research report dated 28 January.
Over the past year, L&T stock has risen 13%, outperforming the Nifty50.
The company’s upcoming five-year plan (Project Lakshya), expected to be unveiled alongside annual results in May, could become a key stock trigger. The plan may include updates on semiconductor investments and potential divestment of the non-core Hyderabad Metro project.
