Shares of Larsen & Toubro (L&T) fell 5% in trade Wednesday after the engineering and infrastructure conglomerate's December quarter (Q3FY24) revenue beat Street estimates, but lower-than-expected margins led to a miss in net profit. L&T's Q3 performance was supported by robust order inflows. The company reported a 19%, 14%, and 15% year-on-year (YoY) growth in revenue, EBITDA, and PAT on a consolidated basis.
At 9:30 am, the scrip was trading 5.23% lower at ₹3,443.15 apiece on the NSE. At this price, L&T shares have tumbled 4% in the last five trading sessions. That said, the stock has rallied over 60% in a year.
While L&T's Q3 numbers were below Street expectations, analysts remain bullish on the counter.
Analysts at domestic broking firm Motilal Oswal have maintained a 'Buy' call on the L&T stock, with an increased target price of ₹4,200 per share. The brokerage has revised its estimates to bake in improved inflows and lower margins.
Motilal expects L&T to continue to benefit from the strong addressable market in both India and international locations.
"Our higher multiple takes into account the continuously improving prospect pipeline and improvements in NWC and RoE despite margins being lower than guidance," the brokerage stated in a note.
However, the brokerage has listed few downside risks to its estimates, including a slowdown in order inflows, delays in the completion of mega and ultra-mega projects, a sharp rise in commodity prices, higher crude prices, an increase in receivables and working capital, and increased competition.
Kotak has downgraded L&T to 'Sell' from 'Reduce' but increased its target on the counter to ₹3,100 a share. "Recent/upcoming events make it difficult to be liberal on multiples, given the growing share of overseas business, Saudi Aramco halting growth plans, the share of fixed contracts going up, domestic ordering continuing to disappoint and the case for fiscal consolidation from FY2025," it said.
InCred has also assigned an 'Add' rating on the counter, with a target of ₹4,016 per share. L&T's management has revised its FY24 order inflow growth guidance upward to 20% from 15% earlier, reflecting confidence in future prospects, the brokerage noted.
Additionally, the company has adjusted its FY24 revenue guidance to 15% from the previous range of 12-15%, driven by a robust order pipeline.
Morgan Stanley has an 'Overweight' call on L&T with a target of ₹4,171 a share. The brokerage highlighted L&T's continued strong execution, despite potential ordering activity slowdown due to elections. However, the company's core margin guidance has been adjusted downward due to timing differences. On the positive side, L&T's working capital is expected to remain steady, it said.
First Published: Jan 31, 2024 10:23 AM IST
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