At first glance, it appears that the market is happy with the June quarter results of Larsen & Toubro (L&T) as the stock rose about 4% in intraday trade on July 27, a day after the company reported its June quarter earnings.
The stock ended 2.67% higher at ₹1,797.20 on July 27.
As Mint reported earlier, the company registered a 44.93% growth in consolidated net profit to ₹1,702.07 crore in Q1FY23 against ₹1,174.44 crore in the corresponding quarter of the previous year.
Consolidated revenue from operations jumped by 22.22% to ₹35,853.20 crore in the quarter under review as against ₹29,334.73 crore in Q1 last year. Notably, both PAT and revenue declined by 52.99% and 32.16% sequentially.
Brokerages remain upbeat
Centrum Broking maintained a buy call on the stock with a target price of ₹2005.
Centrum said L&T’s Q1FY23 results were largely buoyant with E&C (engineering and construction) business performance being in line with the estimate. While pass-through inflation led to a positive surprise in revenue it also depressed the percentage margins on a reported basis.
"We expect 26% CAGR in consolidated earnings per share (EPS) for L&T over FY22-24 with E&C business EPS growing at 18% CAGR (E&C EPS: ₹50.3/ ₹63.8 in FY23/24E). E&C business valuations at 20.4 times/16.1 times FY23/24E are reasonable and leave room for upside. We value E&C business at 20 times FY24E earnings and have SOTP-based target price of ₹2,005," said Centrum.
Another brokerage firm Prabhudas Lilladher also maintained a buy call on the stock with a target price of ₹2,030.
The brokerage firm believes that L&T is well-placed to benefit from overall diversified tender prospects with better order conversion in the domestic market, significant traction in capex from oil exporting countries and an expected uptick in private capex.
"Given the company's focus on diversification of non-core assets, prudent working capital management, diversification into a new business (hydrogen, green EPC), improving the operational performance of Hyderabad Metro and continued execution momentum, we revised upwards our estimate by 0.7/3.9% for FY23/24," Prabhudas Lilladher said.
"The stock is currently trading at a PE of 23 times/20 times FY23/FY24E. We maintain our ‘Buy’ rating on the stock with a revised target price of ₹2,030 ( ₹2,091 earlier), factoring in a revised valuation for subsidiary businesses," the brokerage firm added.
Among the global brokerages, CNBC-TV18 reported that CLSA maintained a buy call on the stock with a target price of ₹2,050, highlighting the continuity of order momentum.
Jefferies also maintained a buy call on the stock with a target price of ₹2,215. As reported by CNBC-TV18, the brokerage firm said L&T should continue to benefit from execution and margin recovery.
According to a MintGenie poll, an average of 37 analysts have a ‘strong buy’ call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking firms and not of MintGenie.
