Larsen & Toubro shares advance 6%, hit over seven-month high

Analysts believe that L&T is well-placed to emerge stronger given its financial, technical and managerial capability to sustain and gain market share

Shares of Larsen & Toubro (L&T) rose 6 per cent to hit an over seven-month high of Rs 1,025 on the BSE on Tuesday. The construction & engineering major's stock was trading at its highest level since March 16, 2020.

In the past four trading days, the stock has risen 9 per cent after L&T said the ordering activity in Infra relatively strong despite pandemic concerns, power generation and hydrocarbon muted. The company saw sequential improvement in ordering momentum in infrastructure segment in September quarter (Q2FY21); encouraging prospect pipeline. The execution picks up in Q2 on the back of higher work force availability and supply chain normalization, it said.

L&T has emerged the lowest bidder for the C6 package of the National High-Speed Rail Corporation’s (NHSRCL) bullet train project, at Rs 7,289 crore. This is the second contract for the company in the mega project. Last month, the company won one of the largest infrastructure tenders the country for design and construction of civil works for 47 per cent of the total alignment of the Mumbai-Ahmedabad High-Speed Rail corridor.

Despite near-term challenges, analysts at HDFC Securities reiterate 'BUY' on L&T, given its strong order book (Rs 2.99 trillion, 3x FY20 core EPC revenue), healthy balance sheet and robust services business.

Analysts at Prabhudas Lilladher believes near-term macro risks (mainly private capex) may appear challenging, but current valuations are adequately pricing-in such risks and believe that L&T is well-placed to emerge stronger given its financial, technical and managerial capability to sustain and gain market share. The company continues to focus on its strategic plan of asset monetization and improving return ratios, the brokerage firm said.