This infra giant's stock gains nearly 2%, CLSA sees 29% upside on robust Q4 order inflow

Larsen and Toubro share price: Shares of Larsen and Toubro (L&T), the construction and infra major, traded with gains in the early morning deals on Monday (February 26). The gains in the index heavyweight were spurred after CLSA reiterated its 'buy' call on the counter with a target of Rs 4,360, a strong potential upside of 29 per cent.
 
At around 9:29 am, shares of the multinational conglomerate were trading higher by 1.48 per cent, or Rs 50.2, at Rs 3,440, while at the day's high, the stock zoomed to Rs 3,449.75.
 
The brokerage maintains that 4Q orders at the company are robust given the huge spurt in domestic orders and are set to beat guidance. While the market is worried about Middle East orders post-Aramco’s advisory, the company's core right to win is on the back of its diversified portfolio and market, driving sector-leading growth, which is hence a reason for its premium valuation.
 
L&T has an improving outlook, with its US$75 billion pipeline up 29 per cent YoY, according to the brokerage. "We believe its margin will improve from 4QFY24 on lower legacy orders in its backlog," noted the brokerage.
 
The company's shares, owing to back-to-back big-ticket orders and in the run-up to the Ayodhya Mandir construction, have seen a phenomenal rally and gained a handsome more than 59 per cent in the last one year.
 
Earlier, ICICI Direct, in its report dated February 7, also gave its buy recommendation on the counter for a one-year target of Rs 4,150.
 
"With margin pain from legacy profits coming to an end and a strong pick-up in execution in new orders, margins will improve to 9.1 per cent by FY26E from 8.4 per cent in FY24E," noted the brokerage.
 
The company commands a lower valuation with a trailing twelve-month price-to-earnings ratio of 38.3.
 
Besides, the stock's RSI is trading below 50, suggesting that more traders are selling than buying and are driving the price down.
 
The consensus recommendation from 32 analysts for the stock is 'buy' with a 'strong buy' from 21 analysts.
 
Larsen & Toubro (L&T) is India’s largest engineering & construction (E&C) company, with an interest in EPC projects, hi-tech manufacturing, and services. The company primarily operates in the infrastructure, heavy engineering, defence engineering, power, hydrocarbon, and services business segments.