Shares of engineering major Larsen & Toubro (L&T) fell 3.51 per cent on Thursday after Nomura downgraded the company’s stock to ‘reduce’ from ‘buy’ and halved its price target citing unfavorable macro-economic environment. Nomura has slashed its price target for L&T stock to Rs 992 from Rs 1,691.
“To our and the Street’s surprise, L&T management has guided for 15-20 per cent order intake growth in FY13, which we see as an extremely challenging task,” Nomura’s analysts Amar Kedia and Indrajit Yadav said in a research report on Thursday. “Foreseeing downside to this guidance, as well as being concerned about L&T’s margins, working capital and balance sheet, we believe L&T will see further de-rating over the medium term and thus downgrade our rating to reduce,” they added.
L&T shares declined Rs 42.30 to Rs 1,163.35 on the Bombay Stock Exchange on Thursday.
According to Nomura analysts, L&T’s shift towards an asset-heavy model and medium-term macro headwinds will likely pressurise return on equities, thus demanding a valuation de-rating.
