Shares of Larsen and Toubro (L&T) in early morning deals on Wednesday scaled up to day’s high price of Rs 2983.05, gaining as much as 1.85 per cent, post its September quarter results. The engineering conglomerate reported a healthy set of quarterly performance with topline and bottom line rising 19 per cent and 45 per cent, respectively.
The company’s revenue from operations in the second quarter of the current fiscal rose 19 per cent YoY to Rs 51,024 crore, driven by improved execution of large orderbook.
However, after rising nearly 2 per cent in early trade, the counter gave up all its gains to trade lower.
The company also successfully completed the first ever buyback of shares during the quarter, aligning with its long-term Lakshya 2026 plan to enhance shareholder value.
“In the near term, we remain cautiously optimistic, considering the recent geopolitical developments. However, we do expect sustained buoyancy of Services and Indian Government’s thrust on capex to continue,” S.N. Subrahmanyan, Chairman and Managing Director at L&T said while commenting on the results.
Analysts maintained their positive view on L&T shares with certain brokerages raising their target price on the stock.
Global brokerage CLSA is bullish and has suggested a target of Rs 3600, implying potential gains of 23 per cent from the last closing price. The brokerage noted that the spike in order inflow and capital return takes return on equity (RoE) at the company to over 15 per cent. Further the company reported guidance beating Q2 earnings, with order inflows up 72 per cent and execution up 25 per cent YoY. Weak link in 2Q was its E&C margin, down 78 bps, added the brokerage.
Jefferies also maintains its ‘Buy’ rating on the stock with an increased target price of Rs 3400. The brokerage highlighted that the construction company’s EBITDA during the review period was lower than estimates. “Management said it should do better than FY24E order flow/revenue guidance, but margin was revised to 8.5-9 per cent from 9 per cent earlier,” added the brokerage.
Amit Anwani of Prabhudas Lilladher believes L&T is well-placed to benefit in the long run with strong tender prospects, better order conversion in the domestic market, significant traction in hydrocarbon and renewable energy orders from international markets like Saudi Arabia and an expected uptick in private capex in the domestic market.
Analysts at Yes Securities remain positive on the company’s strong business model, robust bid pipeline, diversified order book, and healthy balance sheet. However, they have downgraded the stock to ‘Neutral’ given a significant run-up in the stock price, 23 per cent over the last six months. The brokerage has a target of Rs 2,938 on the stock.
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