L&T cracks over 5% post-March quarter numbers; here's what analysts think

Shares of Larsen & Toubro (L&T) cracked as much as 5.6 per cent to Rs 2,238.45 apiece on the BSE on May 11, a day after the engineering and construction major reported its March quarter results. Larsen & Toubro (LT) reported a decent set of quarterly performance, while margins contracted 74 basis points (bps) YoY due to cost pressure in certain Engineering-Procurement-Construction (EPC) projects, notes Prabhudas Lilladher. 

L&T reported a 10 per cent year-on-year (YoY) rise in its consolidated net profit at Rs 3,987 crore for the quarter ended March 31, 2023. The consolidated revenue for the quarter, too, rose 10 per cent YoY to Rs 58,335 crore. However, both the top line and bottom line missed analysts' expectations. ZEE Business Research had projected L&T's consolidated revenue for the quarter under review to come in at Rs 59,311.1 crore, up 12.2 per cent YoY. The net profit of the company was expected to rise 16 per cent YoY to Rs 4182.8 crore.

Further, the company received orders worth Rs 230,528 crore at the group level during the year ended March 31, 2023, registering a YoY growth of 19 per cent. During the year, orders were received across multiple segments like Public Spaces, Hydel & Tunnels, Irrigation Systems, Ferrous Metals, Oil & Gas, Power Transmission & Distribution and Defence sectors, the press release said. For the March quarter,  order inflow stood at Rs 76,099 crore, registering a growth of 3 per cent over the corresponding quarter of the previous year. 

YES Securities, in its earnings review note, said, "We believe that L&T is well-placed to emerge stronger given its financial, technical & managerial capability for sustaining and gaining market share. At CMP, the stock is trading at 26.6x/20.8x FY24E/FY25E earnings. We remain positive about the company’s strong business model, robust bid pipeline, diversified order book and healthy balance sheet." The brokerage has maintained an "ADD" rating to the stock with a revised SOTP-based TP of Rs 2,654.

Prabhudas Lilladher shares similar views. "We believe L&T is well-placed to benefit in the long run with strong tender prospects, better order conversion in the domestic market, significant traction in the hydrocarbon segment from the exports market and an expected uptick in private capex," it said. 

The brokerage has revised its estimate by 0.6/-1.0 for FY24/25, factoring in lower margins in Project and Manufacturing business in the short term. "The stock is currently trading at PE of 26.7/22.7 FY24/25E. Maintain BUY rating, with revised SoTP of Rs 2,615 (Rs 2,479 earlier), valuing core business at PE of 21x FY25E, (20x earlier), given sustainable growth visibility in revenue and order inflow front."