Largecap Infra Stock's Revenue Up 22%, Healthy Order Book, Stock Near 52-Week Low, Buy: Prabhudas Lilladher

Top brokerage firm Prabhudas Lilladher recommends investors to buy the stocks of Larsen & Toubro, which has reported a healthy quarterly performance with revenue growth of 22.2% YoY to Rs. 358.5bn, largely driven by improved execution in the infrastructure segment and better growth in IT & Technology services business. Order book stands strong at Rs. 3.6trn. Now, the company is being traded at a near 52-week high level.

Stock To Buy: Target Price, Current Market Price

The Current Market Price (CMP) of Larsen & Toubro (L&T) is Rs. 1751. Prabhudas Lilladher has estimated a Target Price for the stock at Rs. 2030. This stock has the potential to give a 15.93% return, in the upcoming 1 year. This is a large-cap stock with a market capitalization of around Rs. 253,707 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 1751
Target Price	Rs. 2030
Potential 1 year return	15.93%
52 week high share price	Rs. 2,078.55
52 week low share price	Rs. 1,456.35

The company's order inflows came in at Rs. 418 bn, due to improving order finalization in the domestic market and large order wins in international markets. Its IT & Technology services grew 30.5% YoY, Development Projects grew 19.5% YoY, Hi-Tech Manufacturing grew 5.2% YoY, and Energy Projects grew 2.4% YoY. EBITDA came in at Rs. 39.6bn, increased 24.8% YoY, with EBITDA margins coming in at 11% vs 10.8% in Q1FY22. The consolidated Adj. PAT for Q1FY23 came in at Rs. 17bn and grew 44.9% YoY.

Prabhudas Lilladher: Why Should You Buy This Stock?

Commenting on the stock, the brokerage firm said, "We believe that L&T is well-placed to benefit from overall diversified tender prospects with better order conversion in the domestic market, significant traction in Capex from oil exporting countries, and expected uptick in private Capex. Given the company's focus on diversification of non-core assets, prudent working capital management, diversification into a new business (hydrogen, green EPC), improving the operational performance of Hyderabad Metro, and continued execution momentum, we revised upwards our estimate by 0.7/3.9% for FY23/24. The stock is currently trading at PE of 23x/20x FY23/FY24E. We maintain our 'Buy' rating on the stock with a revised Target Price of Rs. 2,030, factoring in revised valuation for subsidiary businesses."

Company portfolio: Larsen & Toubro

Larsen & Toubro is an Indian multinational engaged in EPC Projects, Hi-Tech Manufacturing and Services. It operates in over 50 countries worldwide. A strong, customer-focused approach and the constant quest for top-class quality have enabled L&T to attain and sustain leadership in its major lines of business for over eight decades. Given healthy OB and tender prospects, management maintained its revenue and order inflows growth guidance of 12-15%, with a core EBITDA margin of ~9.5%. for FY23. NWC to sales to be ~20% (20-22% guided earlier). The company's Hyderabad metro performance is expected to improve in FY23, on the back of improved ridership, assistance from the Telangana government, and refinancing of debt. Tender prospects for 9MFY23 stand at Rs. 7.6trn comprising of the domestic and international market. Net working capital (NWC) to sales improved to 20.9% vs 22.9% in Q1FY22, owing to better collections during the quarter.

Disclaimer

The above stock was picked from the brokerage report of Prabhudas Lilladher. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.