L&T has been amongst the few players to exit from non-core businesses generating huge balance sheet muscle over recent years, according to analysts.
Brokerages either retained bullish calls on Larsen & Toubro (L&T) or raised target prices on the stock after the company’s fiscal first quarter earnings (Q1FY25) beat Street estimates, albeit marginally.
According to analysts, L&T has a dominant position and market share in most operating verticals which imparts flexibility to cherry-pick projects, which helps optimise overall business profitability.
Larsen and Toubro‘s consolidated net profit for the quarter ended June 2024 jumped 12 percent on-year to Rs 2,786 crore, and its revenue from operations rose 15 percent YoY to Rs 55,120 crore.
International brokerage Citi has maintained a ‘Buy’ rating on L&T with a target price of Rs 4,396, highlighting its strong positioning to benefit from growth in capex in India and the Middle East. L&T continues to be Citi’s top pick in the sector.
Emkay Global has maintained its ‘buy’ rating on L&T, albeit lowering the target price to Rs 4,100 from Rs 4,200 per share earlier due to an earnings cut in FY26-27E on account of lower other income estimates.
According to the brokerage, while the capital goods major’s Q1 performance surprised positively, muted execution was seen in the domestic market mainly due to heat-waves and general elections during the quarter.
However, execution is likely to see pick-up in the second half of the year. While the management guided lower order prospects (both YoY and sequentially, especially in Hydrocarbon) at Rs 9.1 lakh crore, FY25 guidance on order inflow, revenue and margin has been maintained.
The management pointed to labor availability challenges across markets which should improve gradually.
According to Nuvama Institutional Equities, transportation, factories and buildings segments will drive growth for the company in the near future. “Strong projects pipeline over the next five years in verticals like transportation (railways, metro and roads) and factories and buildings augurs well for L&T.
Moreover, proven execution record and huge balance sheet equip it to garner a higher share of the huge Rs 40 lakh crore infra capex opportunity over FY21-23E,” the brokerage said.
L&T has been amongst the few players to exit from non-core businesses generating huge balance sheet muscle over recent years, according to analysts.
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