Larsen & Toubro hits new all-time high on winning 2 mega offshore contracts

A consortium led by L&T Hydrocarbon Engineering has secured mega contracts for two offshore packages from a prestigious overseas client.

Shares of Larsen & Toubro (L&T) hit a new high of Rs 2,003.65, up 1.5 per cent on the BSE in Thursday’s intra-day trade after the company announced that a consortium led by L&T Hydrocarbon Engineering (LTHE) secured mega contracts (over Rs 7,000 crore) for two offshore packages from a prestigious overseas client. LTHE is a wholly-owned subsidiary of L&T. The scope of work comprises EPC for new facilities and integration with existing installations.

LTHE is currently executing several domestic and international offshore projects. Organized under Offshore, Onshore, Construction Services, Modular Fabrication and Advanced Value Engineering a Technology (AdVENT) verticals, LTHE offers integrated design-to-build solutions across the hydrocarbon sector to domestic and international customers.

The stock of construction & engineering major was trading higher for the fourth straight day, gaining 5 per cent during the period. In the past three months, the stock has gained 14 per cent, as against a 0.89 per cent rise in the S&P BSE Sensex. In the last six months, the stock has rallied 32 per cent, as compared to a 16 per cent gain in the BSE benchmark index.

Overall, L&T has won orders worth Rs 68,700 crore in H1FY22. Further, continued momentum to win large/mega complex orders/ projects to substantially improve L&T's order intake for FY22E despite challenging environment. This will further strengthen its order book and enhance its revenue visibility in the medium term. We expect standalone revenue, EBITDA CAGR of 12.1 per cent, 12 per cent, respectively, in FY21-23E, ICICI Securities said in a note.

“We reiterate Buy and raise the target price to Rs 2,320 (Dec’22E) from Rs 2,200, as we factor in the higher valuation of IT subsidiaries, in line with Emkay’s valuation of L&T Infotech and Mindtree. We also increase our FY23/FY24 EPS estimates by 3 per cent/2 per cent. While general awarding has been slow in the last few months, the pace of tenders has remained high, giving confidence in inflows for the fiscal year,” Emkay Global Financial Services said in company update.

Apart from the refinancing of the Hyderabad Metro loan, L&T is looking at various other options such as the sale of developed real estate, stake sale in the metro, claims/grant from the Telangana government to minimize the losses, the brokerage firm said in December 23, 2021 report.