Buy This Large-Cap Infra Stock For 25% Gains & 1100% Dividend, Turning Ex-Dividend Next Week

Larsen & Toubro Stock Outlook

The Current Market Price (CMP) of Larsen & Toubro Ltd is Rs 1,675.75/share at the time of writing. Today, it was opened at Rs 1,684.95/share. The stock has given a positive return over the last 5 years, It has delivered 12.44% in 1 year, 13.23% in 3 years & 48.51% in 5 years, respectively. The previous week, the shares moved up 7.33%, while in 1 month, its share price moved up nearly 6.49%.

The 52-week low of the stock is Rs 1,456.35/share & 52 week high is Rs 2078.55. It hit the 52-week low on 20th June 2022, while the 52-week high early this year on 22 January.

If investors buy the share shares of the company at the Current Market Price, they can expect potential gains of 25% in 12 months considering the estimated target price of Rs 2087 by the brokerage.

 

Larsen & Toubro Dividend

The company has declared a final dividend of 1,100% amounting to Rs 22 per share in its Board Meeting held on 12th May 2022.

The ex-dividend date of the final dividend is 21st July 2022. Recently the Company has fixed Friday,22"d July 2022 as the Record Date to determine the Members entitled to receive the proposed dividend of Rs. 22.00 per share of face value Rs. 2 each for the year ended 31st March 2022. 

The company has declared 27 dividends since June 21, 2001. Out of 27 declared dividends, 1 is Special, 4 are interim and 22 are final dividends

Business Updates

Larsen & Toubro (L&T) remains the key beneficiary to tap the opportunities both from the public and private sector in the areas of power (renewable and T&D), transportation (roads, railways, and metro projects) and defence (mainly towards indigenization). The company had a fairly good performance in FY22 growing its orders by 10%, revenues by 15% and profitability by 10% under an excruciatingly tough situation due to covid, the Russia-Ukraine conflict war situation and huge commodity price increases. Company's constant focus on divestment of non-core assets with earlier sale of E&A business and eyeing core assets like a) road SPVs by FY23 b) Nabha power potentially by FY24 to further improve its RoE. Although Hyderabad Metro has faced challenges during the Pandemic but expected to see improvements and overall for Metro, the prospects of improved ridership, phased transit-oriented development (TOD) monetization program, the confirmed Telangana government assistance with soft loan and the recently concluded debt refinancing, performance parameters for Metro should look up in FY23.

Investment Rationale

L&T has also been exploring as well as tapping opportunities in a) defence with Make in India initiatives by Govt. b) foray into new energy space particularly EPC for green hydrogen c) improving its competence in solar EPC by providing storage as L&T is seeking tie-up for grid storage battery manufacturing. Further, government focus on infrastructure and capex momentum expected to be strong bodes well for L&T. On the international front, the rise in crude oil prices could revive GCC spends and boost capex prospects in the Middle East to benefit L&T. In near term, order pipeline at Rs 8.53 tn (-6% over FY22 as L&T will be strictly very selective in bidding) comprising Rs 6.53tn domestic prospects while international at Rs 2.22tn remains encouraging, providing healthy order inflow outlook. The company's current order book remains strong and at a record high of Rs 3.58 tn (3.6x core sales) wherein domestic comprising 73% of the OB at Rs 2.62 tn remains well diversified across sectors providing healthy revenue visibility going ahead.

Future plans in focus

L&T is well positioned to gain market share in FY23 due to its strong liquidity position vs competition & hence guided for order inflow growth of 12-15%. L&T's 'Lakshya 2026 Plan' is focusing on scaling up new business opportunities (Green Hydrogen, Electrolyzers & Battery manufacturing, SuFin, EduTech) which are now in the incubation phase and are expected to bring significant benefits in future. The company remains positive on strong execution going ahead and accordingly has given guidance of 12-15% YoY growth in both revenues and order inflows.

Outlook & Valuation - Buy For Target Price of 2,087

The brokerage said, "We estimate the topline/EBITDA/PAT to grow at a CAGR of 13%/17%/23% respectively in the period between FY22-24E. We belive, risk-reward is favorable for L&T (trading at 18.3x FY24E core EPS) and Recommend 'BUY' with an SoTP-based price target of Rs 2,087. L&T remains the best proxy for domestic capex and the key beneficiary to tap the opportunities both from the public and private sector. Having a strong order pipeline coupled with healthy order book provides good revenue visibility ahead. L&T's 'Lakshya 2026 Plan' is focusing on scaling up new business opportunities which are now in the incubation phase and are expected to bring significant benefits in future."