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Brokerages Raise Price Targets For L&T After Q1 Results

Here are the key brokerage takeaways:

Larsen & Toubro Ltd. employees work in the heavy engineering division in Hazira, India. (Photographer: Prashanth Vishwanathan/Bloomberg News)
Larsen & Toubro Ltd. employees work in the heavy engineering division in Hazira, India. (Photographer: Prashanth Vishwanathan/Bloomberg News)

Brokerages raised price targets for Larsen & Toubro Ltd. even as net profit of the nation’s largest engineering-to-construction company fell and order inflows were less than expected in the first quarter of the ongoing fiscal.

L&T’s net profit slumped by 50.4% sequentially, while revenue dropped 39% in the quarter ended June. Its margin, too, contracted over the previous three months.

For the quarter ended June, the company received fresh orders worth Rs 26,557 crore, lower than a quarter ago. Consolidated order book stood at Rs 3,23,721 crore, with international orders comprising 20% of the order book.

Shares of L&T were trading 0.55% higher at Rs 1,606 apiece as of 10:30 a.m. on Tuesday. Of the 42 analysts tracking the company, 40 have a ‘buy’ rating, and one each recommend a ‘hold’ and a ‘sell’, according to Bloomberg data. The 12-month consensus price target is at Rs 1,807.

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L&T Q1 Results: Profit Falls By Half As Lockdowns Stall Construction

Here are the key brokerage takeaways:

Nomura:

  • Maintains ‘buy’ rating; raises target price to Rs 1,870 from Rs 1,654 apiece.

  • Guidance of low-to-mid-teen revenue growth in FY22F appears reasonable.

  • Order inflow guidance seems ambitious.

  • Expects commodity prices to impact core Ebitda by 210 basis points in FY22F.

  • Potential asset sales and resolution of Hyderabad Metro financing could be longer-term triggers.

Jefferies

  • Maintains ‘buy’, hikes target price to Rs 1,900 from Rs 1,800 apiece.

  • L&T Ebitda 12% below expectations.

  • Pandemic-induced delays, including fatalities and local lockdowns, impacted execution.

  • Order flow was up 13% YoY (FY22E guidance 13%-17%).

Investec Securities

  • Maintains ‘buy’; increases target price to Rs 1,970 from Rs 1,785 apiece.

  • Q1 FY22 Ebitda in line with estimates, despite weakness in finance business.

  • Core Ebitda ahead of estimates, led by better-than-expected margin across most segments.

  • Order inflows (up 13% YoY, down 31% vs Q1 FY20) were weaker than expectations.

  • Order pipeline remains robust, with the rise in crude prices, improving hydrocarbons prospects.

  • Sees L&T as a beneficiary of continued strength in government capex.

Motilal Oswal Securities

  • Maintains ‘buy’; hikes target price to Rs 1,835 from Rs 1,700 apiece.

  • L&T’s adjusted PAT missed estimates by 19% (owing to higher tax rate and lower other income).

  • Core E&C order inflows were up just 11% despite the weak base of last year — a key negative.

  • Increases target price to Rs 1,835, driven by mark-to-market of the current market price of the listed subsidiaries.