Are analysts bullish on L&T after robust Q3 order growth?
Even as sluggish orders from power sector continue to worry Larsen & Toubro, its other business segments like hydrocarbons and urban infra will boost order book going ahead, the company's chief financial officer, Shankar Raman told media yesterday.
Even as sluggish orders from power sector continue to worry Larsen & Toubro, its other business segments like hydrocarbons and urban infra will boost order book going ahead, the company's chief financial officer, R Shankar Raman told media yesterday.
In Q3, which is traditionally a lean quarter for engineering companies in terms of orders, L&T surpassed industry expectation by recording 14% jump in its order book to Rs 1950 crore,YoY on sharp rise in electrical and electronics segment and buildings and urban infra segments.
A major push came from engineering and construction segment which garnered fresh orders of Rs 17818 crore, around 16% up, YoY, of which. Rs 3564 worth orders came from international projects.
Here is what they have to say
Macquarie stated, since the company has already achieved over 85% of its order targets, there should not be any problem for it to get remaining orders in Q4, which is the strongest quarter in terms of procuring orders. "The firm needs anything between 0-15% growth to achieve in FY13 order size targets. The company has highlighted strong traction in domestic hydrocarbon segment as expected policy reforms will accelerate growth," stated the brokerage. Confident of the company's future growth targets, the firm has maintained 'outperform' on the stock with a target price of Rs 1584.
CLSA has also upgraded the stock to an 'outperform' with a raised target of Rs 1750 after L&T surprised the market on order book growth in Q3.
However, Jefferies has downgraded the stock from 'buy' to 'hold' with a target of Rs 1800 because it expects revenue growth slowing down due to sluggish execution of projects. The firm also does not see major uptick in margins from current levels. It further explains that despite the company's order book escalating to Rs 60100 crore for nine-month ending period, it is still down 75%, YoY
Morgan Stanley believes despite order book growth, capex is seen drying up due to scheduled elections in FY14. The industry including L&T will witness margin pressure due to intense competition. The firm has revised stock price target to Rs 1585 from Rs 1440 on the back of muted revenues and margins.
Citi has also cut its target price to Rs 1653 from Rs 1732 on higher quantum of slow moving orders. Further, to offest the sluggish environment, the firm is looking at procuring international orders, where margins are at least 100-150 bps lower then what domestic projects offer.