L&T Poised to Secure Major QatarEnergy LNG Project: Growth Prospects Soar

Larsen & Toubro (L&T) is expected to win a significant QatarEnergy LNG project bid, enhancing its order inflow. The contract aligns with QatarEnergy's LNG expansion. L&T's robust performance in Q3FY25 positions the company for further growth. Despite budget constraints, L&T anticipates surpassing its growth forecasts for FY25.

Larsen & Toubro (L&T) is on track to clinch a pivotal contract with QatarEnergy worth between USD 4 billion and USD 4.5 billion, according to Axis Capital, which cited media sources. This contract is integral to QatarEnergy's ambition to expand its liquefied natural gas (LNG) production from 70 million tonnes per annum (MTPA) to 126 MTPA.

Having already announced Rs 350 billion in core orders for Q4FY25, the addition of the Qatar contract positions L&T to surpass Axis Capital's Rs 600 billion core order inflow expectations for the quarter.

Moreover, the company is on track to exceed its annual consolidated order inflow target of 10% year-on-year (YoY) for FY25, potentially surpassing Axis Capital's estimate of Rs 3.45 trillion, thereby achieving a 14% growth. Q3FY25 results showcased robust performance with significant core order inflows and a 20% rise in core revenue.

L&T's future outlook will largely depend on securing complex projects over the next 12 to 18 months, with its FY26 prospect pipeline set to be a crucial indicator of growth potential, potentially showing an 8%-10% increase.

Despite flat allocations in railway and road capex in the Union Budget, this is not perceived as a significant downside. L&T maintains a conversion rate of 15% to 25% for prospects to orders, aided by a strong central sector exposure which forms 13% of its Rs 5.6 trillion order book.

The company has minimal exposure to standard NHAI EPC/HAM projects and conventional railway projects. Improvements in working capital are evident, with the net working capital (NWC) to sales ratio improving by 390 basis points YoY to 12.7%.

For FY25, L&T has upgraded its revenue growth guidance to over 15%, with expectations of 16%. Order inflows are projected to exceed 10%, potentially reaching 14%. Margins have tracked a 10 bps increase, with guidance remaining steady. By FY27, core earnings per share are projected to grow at a 23% compound annual growth rate from FY24 to FY27 according to estimates.

(With inputs from agencies.)