Larsen & Toubro gains 2%, hits over six-mth high on strong revenue outlook

Shares of Larsen & Toubro hit an over six-month high of Rs 1,951 after rising 2 per cent on the BSE in Friday’s intra-day trade as the company’s strong order book of nearly Rs 4 trillion suggests good revenue visibility in coming years.

The stock of the country’s largest engineering & construction (E&C) company was trading at its highest level since February 2, 2022. It had hit a record high level of Rs 2,078 on January 18, 2022.

In the past one month, L&T has outperformed the market by gaining 9 per cent as compared to a 1.4 per cent rise in the S&P BSE Sensex. Further, in the past three months, the stock has rallied 19 per cent vs a 5.6 per cent gain in the benchmark index.

L&T primarily operates in infrastructure, heavy engineering, defence engineering, power, hydrocarbon, services business segments. The consolidated order book of the group was at a record Rs 3.63 trillion as on June 30, 2022, with international orders having a share of 28 per cent.

In the April-June quarter (Q1FY23), L&T secured orders worth Rs 41,805 crore at the group level, registering a growth of 57 per cent over corresponding quarter of the previous year. The domestic order environment in Q1FY23 was also significantly better compared to Q1FY22.

For FY23, L&T has retained guidance of 12-15 per cent growth in the group order inflow, and revenue and margin in projects manufacturing business portfolio are expected to remain at around 9.5 per cent.

“At a macro level, there was an improvement in domestic tendering and awarding activity. Secondly, we expect public capex spends comprising centre, states, public sector units in the current year to be better than that of the previous year. Hopefully, private capex would also witness improvement in the second half of the current year,” ICICI Securities said.

L&T said a robust business portfolio, improved working capital management; focus on cash generation/distribution and finally divestment of non-core assets will lead to better ROEs.

The company in its first-year post announcing its Lakshya 26 strategic plan expects to continue its planned trajectory of profitable growth, efficient and timely execution of its large order book, many value enhancing measures, and retain its leadership position and improve shareholder value on a sustainable basis, the management said in the Q1 earnings conference call.

The company is on the path of diversification into new businesses of green energy and e-commerce and digital platforms and at the same time pursuing exit options/or limiting exposure in non-core businesses over the Lakshya 2026 strategic plan period, the management said.