L&T hits record high on hopes of strong order inflows, stock rises 4%

Shares of Larsen & Toubro (L&T) soared 4 per cent to hit a new high of Rs 2,214 in Tuesday’s intra-day trade, on expectation of strong order inflows and improved execution. The stock of engineering & construction company surpassed its previous high of Rs 2,210.50, which it had touched on December 16, 2022. In comparison, the S&P BSE Sensex was up 0.65 per cent at 60,482 at 12:28 PM.

On Monday, L&T said that its construction arm secured significant order (ranging from Rs 1,000- Rs 2,500 crore) for construction of commercial space in Hyderabad from a reputed and prestigious commercial developer.

The mandate is to construct two towers with commercial office space in Hyderabad with approximate built-up areas of 28.91 lakh sq ft and 28.53 lakh sq ft, respectively. The project scope includes civil work for the composite structure including MEP, finishes & fade to construct the towers in 6B+G+22 floors and 6B+G+41 floors configurations. The project is scheduled to be completed in 18 months.

Analysts at ICICI Securities believe that the order inflow momentum looks strong and is set to continue to Rs 6.3 trilion pipeline, with better conversion ratio.

"In H1FY23, L&T announced order inflows of around Rs 93,719 crore. The management is confident of achieving full year guidance of around Rs 2.22 trillion i.e. 15 per cent growth for FY23E. Also, it retained its 12-15 per cent revenue growth guidance for FY23E," they said.

On Friday, L&T announced that it has signed an agreement with the Norway-based H2Carrier to develop floating green ammonia projects for industrial-scale applications. The Indian multinational conglomerate said that the “timely” partnership between them will help fast-track the decarbonisation goals.

Meanwhile, L&T’s board of directors of the company is scheduled to meet on January 30, 2023 to consider and approve the unaudited financial results of the company for the quarter and nine months period ended December 31, 2022.

In Q3FY23, analysts expect adjusted standalone (including hydrocarbon) revenue of L&T to grow 13.9 per cent to Rs 29,226 crore. EBITDA, too, is expected to grow 18.8 per cent to Rs 2,425.8 crore with margins around 8.3 per cent, owing to better execution. Adjusted PAT (ex-E&A), meanwhile, is expected to grow 12.9 per cent to Rs 2,059.2 crore adjusted for lower interest expense and lower tax.

L&T’s H1FY23 (April to September) performance has been commendable despite cost pressures in its core business and supply chain challenges, said analysts at Sharekhan. Further, a robust order intake and pipeline gives comfort. Besides, international outlook is also buoyant given a healthy order pipeline and emerging opportunities in non-oil segments as well.

"Over the long term, L&T remains at the forefront to reap benefits from the AtmaNirbhar Bharat scheme with its diversified businesses across sectors such as infrastructure, heavy engineering, hydrocarbons, defence, IT as well as green energy. The company is the best proxy for domestic capex upcycle," analysts at Sharekhan said.