Inderes’ latest view on L&T:
The new company aims for stronger growth than its history
The new L&T’s financial targets are 6% annual net sales growth (including acquisitions), an 11% adjusted EBITA margin, and net debt/adjusted EBITDA of 1.5–2.5x. According to the company’s carve-out figures, the adjusted EBITA margin has been around 10% between 2022 and 2025. We forecast it to be just under 9.0% in 2026, but to recover back to around 10% by 2028, supported by operational efficiencies and a slightly improving demand situation. The company’s historical growth has been quite modest. Therefore, achieving the 3% market growth forecast for the coming years organically would, in our view, be a good performance. In the coming years, achieving growth is hampered by the negative effects of the municipalization of waste management in Finland. Our forecasts expect growth that is clearly more modest than the target, but they do not include major growth investments or acquisitions, which would be required in practice to meet the growth target.
We consider the stock’s valuation to be affordable
In our assessment, L&T’s return expectation for the coming years consists of a steady dividend yield (6–7%), moderate earnings growth, and multiple expansion potential. The stock’s valuation level is, in our view, affordable by many metrics (e.g., the 2026 adjusted P/E and EV/EBIT are around 10x), but a stronger increase in multiples may require a clearer outlook for net sales and earnings growth than what we currently see. We also believe the company is a very potential acquisition target for both private equity investors and industrial players, which in part supports the return expectation.