L&T share price down 4% this week; is it time to buy the stock, or should you wait for further correction?

Shares of Larsen & Toubro (L&T), a prominent conglomerate, have faced some downward pressure recently, raising the question of whether investors should consider buying the stock during its dips. The stock has fallen about 4 per cent in the current week. On Thursday, January 9, the stock declined over 3 per cent in intraday trade on the BSE.

L&T share price trend

L&T shares hit a 52-week low of ₹3,175.50 on June 5, followed by a 52-week high of ₹3,963 on December 10 last year. The stock’s performance last year was subdued. It gained just a little over 2 per cent while the Sensex gained 8 per cent.

L&T stock: time to buy?

Experts appear largely positive about the stock for the long term as they point out healthy order flow and the company’s track record of execution.

In an exchange filing on January 8, the company said its heavy engineering arm had won multiple orders in Q3FY25 in the overseas and domestic markets.

In the overseas market, it secured one of the largest LNG project orders in the USA, it said.

It also secured a prestigious repeat order from a leading oil and gas customer in Saudi Arabia for a Fluid Catalytic Cracking Unit (FCCU) revamp project. It bagged an order for the supply of critical components for hydrocracker reactors and high-pressure heat exchangers from a prestigious client in Kuwait, said the company.

On the domestic front, Heavy Engineering has secured orders for three urea reactors – from Southern Petrochemical Industries Corporation for India’s longest urea reactor, Indian Farmers Fertiliser Cooperative Ltd, and Indorama India Private Ltd, said L&T.

Additionally, the company said in a separate exchange filing on January 7 that the L&T power transmission and distribution (PT&D) vertical has recently won new orders in India and the Middle East.

L&T will report its December quarter earnings in the coming weeks. Experts expect the company to report a healthy set of numbers.

Brokerage firm Motilal Oswal Financial Services, which has a buy call on the stock with a target price of ₹4,300, expects the company’s consolidated revenue growth of 20 per cent year-on-year (YoY), led by a24 per cent YoY revenue growth for core E&C (engineering construction and contracts). The brokerage firm expects core E&C EBITDA margin of 8.1 per cent for the quarter, an increase of 40 bps YoY and 50 bps QoQ.

Brokerage firm BNP Paribas has an “outperform” view on the stock with a target price of ₹4,605. This implies a 28 per cent upside potential from the stock’s January 8 close of ₹3,596.15 on the BSE.

“We not only believe L&T is well-placed to deliver on its guidance parameters in FY25 (especially 10 per cent year-on-year order inflow growth), but its strength could continue into FY26. We also expect L&T to deliver on core EBITDA margins and a further reduction in net working capital,” BNP Paribas said on January 7.

The ongoing tussle in the Middle East has raised concerns about the company’s order intake prospects and execution. However, BNP Paribas rejects this concern and does not see any slowdown in Middle East capex in FY26 and beyond.

On valuations, BNP Paribas sees L&T’s core PE (price-to-earnings ratio) at nearly 18 times FY27E EPS (earnings per share) as less demanding than peers, given its growth pipeline and visibility of 18 per cent ROE (return on equity) by FY26 versus 16 per cent in the first half of FY25.

“Our SOTP-based target price of ₹4,605 implies a core PE of nearly 25 times FY27E EPS, leaving adequate headroom for a re-rating, in our view. A large payout, given the significant cash build, is also a key near-term re-rating trigger. Weakening domestic order inflows (especially from transport infra and defence) remain the key risk,” BNP Paribas said.

The stock looks poised for healthy growth in the long term. However, for the short term, technical experts advise some caution.

According to Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers, L&T has formed a head-and-shoulders pattern, with its neckline already breached. He said traders should wait for confirmation of a daily close below the neckline to validate the bearish setup.

However, Patel added if the stock manages to close above ₹3,600, the pattern could be negated, signalling a potential upward move toward ₹3,750.

“This dual scenario calls for caution when trading L&T, as the next directional move hinges on key closing levels. Monitoring these levels closely is crucial, as they will determine whether the bearish or bullish scenario plays out,” said Patel.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.