Buy This Large Cap Engineering & Construction Stock, Brokerage Sees 17% Upside

Leading brokerage firm ICICI Direct in its recent report has placed a "buy" call on Larsen & Toubro Ltd. (L&T). The brokerage has given a target price of Rs 2355 per share and claims a potential upside of 17% in share price in 12-15 months. Larsen & Toubro (L&T) is India's largest engineering & construction (E&C) company, with an interest in EPC projects, hi-tech manufacturing and services. The company primarily operates in infrastructure, heavy engineering, defence engineering, power, hydrocarbon, and services business segments. The infrastructure segment contributes ~45% to consolidated revenue followed by services (~30%).

Current Market Price, 52-week High & Low & Returns

The current market price of L&T stock on NSE is Rs 2,015.10 apiece. The stock on Friday gained 0.32% as compared to its previous close. The stock recorded its 52-week high on 18 January 2022 at Rs 2,078.55 and the 52-week low on 20 June 2022 at Rs 1,456.35, respectively. With a market capitalisation of Rs 2,83,150 crore.

The share gained 2.03% in a week. Whereas, in 1 and 3 months, shares jumped 7.67% and 13.2%, respectively. It has given 5.56% positive returns in 1 year. In the past 3 years the stock has given 38.76% and in 5 years 63.17% positive returns, respectively. 

Q2FY23 Results

L&T reported a good set of Q2FY23 numbers. Adjusted standalone revenue was up 21.1% YoY to Rs 25,769.8 crore. Standalone EBITDA was up 12.1% YoY to Rs 1907.6 crore. Margins declined 59 bps to 7.4% on a YoY basis. Consequently, standalone adjusted PAT at Rs 2109.5 crore (down 1.7% YoY). Order inflows came in at Rs 51,914 crore, up 23% YoY.

 

ICICI Direct Maintains "buy" call with a target price of Rs 2355/share

L&T reported a strong order book of Rs 372381 crore, suggesting good revenue visibility in coming years. "We maintain our BUY rating on the stock Target Price and Valuation: We value L&T at Rs 2355 on an SoTP basis," the brokerage has said.

Key triggers for future price performance

L&T has targeted revenues and order inflow CAGR of 15% and 14%, respectively, over FY21-26 with a consolidated RoE of 18%. L&T will focus on emerging portfolios like green EPC, manufacturing of electrolysers, battery & cell manufacturing, data centres and platforms (Sufin & Edutech) in the next five years. Focus on asset monetisation to further strengthen the balance sheet and improve return ratios. Strong b/s, controlled working capital and strong cash generation.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.