L&T shares crack nearly 6% on weak guidance for FY25; should you buy, hold or sell the stock?

Shares of the infra major Larsen and Toubro emerged as the top Nifty loser in Thursday’s trade (May 9, 2024) as the company on the sidelines of its Q4 results released yesterday came up with weak guidance for FY25.

"We expect revenue growth to be at around 15% for fiscal year 2025," Shankar Raman, the company's CFO said in a post-earnings call. Indian elections as well as geopolitical tensions in West Asia will affect both order inflow and execution, he added.

At 10:15 am, L&T shares traded with a cut of 3.56 per cent or Rs 124.05 at Rs 3,361.15 per share on the BSE, while at day’s low it hit levels of Rs 3290, a drag of nearly 6 per cent.

On an overall basis, the company reported a mixed set of Q4 earnings with revenue and PAT coming in higher-than-estimates. For the January-March quarter, the company recorded a consolidated net profit of Rs 4396 crore, up 10 per cent year-on-year and beating analysts' estimate. The civil construction company’s  revenue from operations rose 15 per cent to Rs 67,079 crore, with international revenue contributing 45 per cent of the total.

Zee Business Research projected the company to report a net profit of Rs 4,109 crore for the reporting quarter, while revenue was expected at Rs 65,497 crore, boosted by growth in its core engineering and construction unit. 

Margins at the company, however, lagged estimates, and stood at 10.8 per cent versus 11.71 per cent in the corresponding period a year-ago.  The company’s consolidated order book as of March 31 rose to Rs 4.76 lakh crore, a 20% rise from a year earlier.

Should you buy, hold or sell L&T stock after its Q4 show?

Jefferies reiterates its ‘buy’ rating on the counter. Nevertheless, it has slashed its target to Rs 3,970 from the earlier Rs 4,135.

Citi also continues with its ‘buy’ rating and has raised the target by a marginal to Rs 4,396 from Rs 4,373 earlier. The brokerage maintains that the company has reported a strong 4Q and gave healthy FY25 guidance. Net working capital or NWC surprised positively by falling to 12 per cent of the revenue from 16 per cent in FY23. Further, the brokerage added that is not unduly concerned by flat margin guidance.

CLSA is also bullish on the counter and has continued with its 'buy' rating but with a slashed target price of Rs 4,151 from the earlier Rs 4,260. The brokerage noted that the key positive in FY24 was a big beat to order inflow guidance, driving new orders up 39 per cent on-year & robust core execution up 27 per cent on-year.

Furthermore, Goldman Sachs continues with its 'buy' call on L&T with a reduced target of Rs 3,600 from Rs 3,900 pegged earlier.