HDFC Securities is bullish on Larsen & Toubro has recommended buy rating on the stock with a target price of Rs 1634 in its research report dated November 23, 2016.
HDFC Securities' research report on Larsen & Toubro
L&T has a strong order book (over 2x TTM sales) with negligible slow moving orders. Visibility on new orders is strong led by public sector capex in roads, railways, metros, power T&D and water. High-end residential real estate is only 6% of L&T’s order book, thereby limiting the demonetisation impact. Importantly, one-off provisioning (hydrocarbon and shipbuilding) is done with and working capital has also begun to improve. Losses post commissioning of Hyderabad metro is the only risk to earnings, in our view. Post the recent correction (12% in last one month), we believe the negatives are in the price. Upgrade L&T to BUY with a revised SOTP based TP of Rs 1,634 (20x Sep-18E P/E for core EPC business).
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