Larsen & Toubro rallies 15% in a month, nears record high

L&T was up 2 per cent at Rs 1,538 on the BSE, trading close to its all-time high level of Rs 1,593 touched on February 2, 2021

Shares of Larsen & Toubro (L&T) were up 2 per cent at Rs 1,538 on the BSE in intra-day trade on Friday in an otherwise range-bound market. The stock of the construction & engineering major was trading at its highest level since March 12, 2021. It was hovering close to its all-time high level of Rs 1,593 touched on February 2, 2021. The S&P BSE Sensex was up 0.10 per cent at 52,282 points at 09:25 am. 

L&T has outperformed the market by surging 15 per cent in the past one month on expectations of healthy orders from both domestic and international markets. In comparison, the benchmark index was up 7.3 per cent during the same period.

L&T has rightly prioritised its Balance Sheet strength over growth during the second COVID wave. While COVID 2.0 has brought on similar challenges as last year, construction activity has been ongoing unlike last year and hence, the impact should be lower than last time, analysts said.

While announcing its March quarter results on May 14, L&T management said it is witnessing good ordering traction from segments such as Metro, Railways, Roads, Expressways, Water, Renewables and Power T&D. It guided for low to mid-teen growth in revenues and order inflow for FY22. The management indicated that the tender pipeline remains strong at Rs 9.6 trillion for FY22, comprising of domestic orders worth Rs 6.6 trillion and international orders of Rs 3 trillion.

“Infra (Rs 6.95 trillion opportunity) and Hydrocarbon (Rs 1.4 trillion opportunity) remain key growth segment in terms of order inflow. We believe that L&T is well-placed to emerge stronger given its financial, technical and managerial capability for sustaining and gaining market share”, analysts at Prabhudas Lilladher said in the Q4FY21 result update.

“The pipeline prospects stand at Rs 9.6 trillion, 13 per cent higher compared to the beginning of last year. International and domestic market forms 26 per cent and 74 per cent, respectively of prospects. The infrastructure and Hydrocarbon sector forms 77 per cent and 16 per cent, respectively of overall prospects. Stable oil prices auger well for prospects in the Hydrocarbon segment as well as improves overall prospects in the Middle East,” analysts at Motilal Oswal Financial Services said in a results update.

The brokerage firm maintained 'buy' with a target price of Rs 1,700 per share on account of unchanged core business target P/E multiple of 20x versus the long-term average of 22x, and contribution from four listed subsidiaries, after applying a 20 per cent holding company discount.