Brokerage firm HSBC has downgraded engineering and infrastructure conglomerate Larsen & Toubro Ltd. (L&T) to hold” from its earlier rating of “buy”.

The brokerage has also cut its price target to ₹3,500 from ₹3,900 earlier. The revised price target from HSBC implies a potential downside of another 8% from Wednesday’s closing levels.

HSBC says that L&T’s near-term order inflows are likely to be under pressure and the brokerage sees a downside risk to the company’s order inflow guidance for the current financial year.

For financial year 2025, L&T is anticipating order inflows to grow at 10%, revenue to grow at 15%, while core margins are likely to be at 8.25%.

For the next financial year, L&T expects order inflows of ₹3.4 lakh crore, revenue to be ₹2.2 lakh crore and a Return on Equity (RoE) of 18%.

HSBC expects L&T’s near-term order inflows to be under pressure due to:

• A very high base of order inflows, particularly in the international segment.
• Loss of some orders in the hydrocarbon segment in recent months.
• Weak overall order prospect pipeline, particularly in the domestic infrastructure segment.
• Continued impact of a busy election season and
• Missing out on large domestic power capex opportunities due to competitive pressures as well as the lack of participation.

HSBC is expecting L&T to post an order inflow growth of only 2% in financial year 2025, compared to the management guidance of 10%.

Peaking of the energy market, slowing state capex growth, and trend level profitability will drive a reset of its valuation multiples, HSBC wrote in its note.

Out of the 35 analysts that have coverage on L&T, 29 of them continue to maintain a “buy” recommendation on the stock, four of them have a “hold” rating, while two have a “sell” recommendation.

Shares of Larsen & Toubro have slumped to the lowest point of the day, currently trading 1.1% lower at ₹3,749. The stock is up 6% on a year-to-date basis.