Larsen & Toubro shares to give 24% returns in one year; buy now, say stock market experts

Larsen & Toubro (L&T) Q1FY20 results are out and the company has registered robust 9.7 Y0Y revenue growth and 99 bps improvement in its margins that have now dipped to 11.2 per cent. On the basis of these strong fundamentals, the stock market experts are of the opinion that the counter is poised to show an upside swing of around 24 per cent in long-term - means that in a year L&T share is a portfolio stock. Experts are suggesting that a share market investor can take a buy position in the counter at current levels of Rs 1,387.4 per stock levels for the target of Rs 1,720 per stock levels in one year.

Giving details of the L&T company's fundamentals Parikshit D Kandpal, Analyst, HDFC Securities said, "L&T posted a robust 9.7 per cent YoY revenue growth in Q1FY20 (at Rs 296bn), largely driven by Infra, Hydrocarbon and the Services business. Company's EBIDTA (Earnings Before Interest, Taxes, Depreciation and Amortization) margin improved 99bps YoY to 11.2 per cent, led by a favorable segmental mix." 

On MindTree takeover, Kandpal said that L&T has acquired 60.59 per cent stake post completion of the open offer and is now classified as the promoter. Line by line consolidation will happen from Q2FY20. "We await further details on the funding structure before incorporating Mindtree financials in our estimates," said Kandpal.

On the suggestion to the stock market investors in regard to the L&T share price, Kandpal said, "Fundamentally, the L&T stock is bullish and is poised to show an upside swing up to Rs 1,720 per stock levels in 12-months." On Wednesday, the L&T share price has closed at Rs 1,387.4 per stocks means an investor can expect up to 24 per cent returns in his or her investment in L&T stock.

Amar Kedia, Research Analyst at Emkay said, "A significant increase in net working capital and continued pressure on infra margins are the key causes for concern and areas of discomfort in an otherwise continued show of execution strength, despite a challenging environment. Despite the hiccups, we concur with management on the impact of seasonality and macroeconomic challenges." He also advised stock market investors to take buy position in the L&T counter in cash segment suggesting the counter is a portfolio stock and it should be taken for long.