BoFA Securities has downgraded Larsen & Toubro (L&T) to underperform from buy, with a target price of ₹3,700, citing limited upside potential after the stock’s 10% rise in the past two months.
The brokerage noted that while L&T’s exit from the Hyderabad metro project is earnings and ROE accretive—leading to a 3–4% upgrade in FY26–28 earnings estimates—incremental gains in margin and working capital improvement will be harder to achieve. It added that the company’s ROE expansion could be supported by potential buybacks, with $2.6 billion in surplus cash available.
However, risks remain around slowing domestic capex momentum and weaker crude oil prices, which could weigh on future order inflows. Given the recent outperformance, BoFA believes the risk-reward is now unfavourable.
Disclaimer: The views and recommendations made in this article are those of BoFA Securities. This article does not constitute investment advice. Investors should consult their financial advisors before making any investment decisions.
