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Shares of Larsen & Toubro (L&T) surged over 6 per cent to Rs 3,631 per share on October 31
L&T Rises 6% After Q2 PAT Beats Street Estimates
Shares of Larsen & Toubro (L&T) surged over 6 per cent to Rs 3,631 per share on October 31 as brokerages praised its July-September quarter (Q2FY25) performance, which exceeded market expectations, bolstered by strong order inflows and effective project execution.
The company reported a 5% increase in net profit for the quarter ended September 2024, rising to Rs 3,395 crore from Rs 3,223 crore in the same period last year.
L&T achieved consolidated revenue of Rs 61,555 crore for the quarter ended September 30, 2024, marking a year-on-year growth of 21%, aided by accelerated progress in various businesses within the Projects & Manufacturing (P&M) portfolio.
International revenues during the quarter reached Rs 32,057 crore, constituting 52% of total revenues. This strong performance is largely reflective of a robust international Projects & Manufacturing (P&M) order book, according to the company filing.
What Should Investors Do?
CLSA rated L&T as ‘outperform’ and set the highest target price of Rs 4,151 per share, noting that L&T achieved its third consecutive quarter of E&C margin growth. The firm highlighted robust order inflows in Q2, even with India’s typically softer quarter, and added that management remains optimistic about achieving its FY25 order inflow goals.
UBS maintains a ‘Neutral’ rating on L&T with a target price of Rs 4,000. For Q2 FY25, the Middle East has driven a strong core results beat, while the domestic market continues to lag. The energy and hi-tech segments experienced a decline in profitability, which limited core margin improvement for both Q2 and H1. UBS notes that L&T could aim for higher conversion rates and increased market share in domestic orders by leveraging its current pipeline.
Bernstein maintains an ‘Outperform’ rating on L&T with a target price of Rs 3,891.
For Q2 FY25, the international hedge is proving effective. The company demonstrated another quarter of strong execution and a stellar working capital position, although order inflow declined due to a high base last year. Management has retained their guidance, but Bernstein considers it a challenging goal. While core margins have yet to fully improve, they continue to exceed last year’s levels. Bernstein also anticipates strong performance supported by soft commodity prices and remains confident ..
BNP Paribas maintains an ‘Outperform’ rating on L&T with a target price of Rs 4,421.
The company is on track to meet all guidance targets, with order inflow guidance appearing easier to achieve than anticipated. The Middle East market is showing resilience, with no signs of slowing down. Capital expenditure in the region could bolster growth for CY25. Additionally, valuations have improved following recent corrections over the past month, suggesting that a rerating impact may be considered.
Nomura joined in with a ‘buy’ recommendation, setting a target price of Rs 4,100 per share. Analysts believe L&T’s FY25 order inflow growth target appears feasible following the Q2 performance surprise.
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