Larsen and Toubro’s heaquarters in Mumbai (Photographer: Kuni Takahashi/Bloomberg)

Brokerages Bullish On L&T’s Order Outlook

Brokerages remained upbeat on Larsen & Toubro Ltd., after the engineering and construction major’s March quarter performance surpassed analysts’ estimates.

L&T’s guidance for the current financial year, of 12-15 percent revenue growth and 10-12 percent order inflow growth, is realistic, CLSA said in a note to clients. The company has a credible strategy to improve growth and return on equity, CLSA said, even as it retained its ‘Buy’ rating on the stock.

Of the 38 brokerages tracking the stock, 32 have a ‘Buy’ rating on it, according to Bloomberg data. The consensus 12-month target price on the stock is Rs 1,611.74, indicating a potential upside of 17 percent from Tuesday's closing level.

L&T posted 5 percent increase in net profit to Rs 3,167 crore in January-March quarter, as compared to Bloomberg consensus estimates of Rs 2,995 crore. Revenues were in line with analyst estimates at Rs 40,678 crore.

Credit Suisse raised L&T’s earnings per share estimates for the current financial year by 7 percent to Rs 60, and maintained its ‘Outperform’ rating on the stock.

Upside surprises are likely from possibly better margins on strong execution, strengthening of private investment cycle and lower losses from Hyderabad metro in FY20E
Credit Suisse Note

Shares of L&T rose as much as 3.5 percent to Rs 1,425 apiece. The stock has gained 15.84 percent in the last one year, compared to the 13.04 percent rise for the benchmark SP& BSE Sensex during the same period.

Here’s what some other brokerages had to say about the company:

Edelweiss

  • Maintained ‘Buy’, with a target price of Rs 2,050 per share.
  • Better execution in FY18 reflects traction in segments like water and power transportation and distribution.
  • Management guidance of 12-15 percent revenue growth and working capital discipline of 18-19 percent remain key monitorables.

Motilal Oswal

  • Maintained ‘Buy’, with a target price of Rs 1,650.
  • Built in 10 percent growth in orders, 12 percent growth in sales and 30 basis points improvement in margins (ex-services).
  • Expect L&T to register 10 percent revenue growth over the FY17-21 estimates with margin improvement of 200 basis points over the same period to 12.3 percent.
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