Analysts upgrade L&T as better execution drives Q4; stock up 15%

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26 Aug, 2025 12:21

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Moneycontrol BureauInvestors are falling over each other to buy shares of Larsen and Toubro after its surprising January-March results. Shares of the infrastructure and engineering major rose over 15% percent intraday on Thursday as its fourth quarter earnings beat analysts' expectations on all counts. This is its biggest one-day gain in last seven years.Its consolidated profit rose 18.6 percent to Rs 2454 crore compared to year-ago period, driven by strong revenue and operational performance despite higher finance and tax cost. Revenue increased 18.3 percent to Rs 33,157 crore on the back of good progress in project execution and more than 50 percent of revenue was contributed by infrastructure segment.Analysts are also bullish on the stock and upgraded it with increased target price. Morgan Stanley has an overweight rating on the stock with an increased target price of Rs 1596 per share factoring in a rise in market multiple. The brokerage firm is impressed by L&T's step-up in execution in India, with domestic revenues (excluding services business) moving up 15 percent year-on-year. The company could manage to keep its working capital constant at last quarter's level which is a positive. Jefferies has upgraded the stock to buy from hold with a believe that L&T is at an inflection point post strong Q4 results. It feels that the next 12 months should see engineering and construction (E&C) execution recovery and multiple re-rate. It says L&T has positively surprised on earnings in Q4FY16 especially on execution recovery. "Order flow guidance of 15 percent (YoY) may be ambitious as private sector capex is yet to recover. However, double-digit execution growth and 5-10 percent (YoY) order flow growth in FY17 should see the stock re-rate," it says in a report.  For FY17, L&T expects revenue to grow at 12-15 percent and order inflow at 15 percent over FY16.Nomura has a buy rating as strong pickup in infrastructure execution and margin boosts confidence in recovery. It has a revised target of Rs 1744 per share. According to the brokerage firm, current order backlog provides strong growth visibility and Q4FY16 will likely boost confidence in the company’s ability to execute the orderbook profitably. It agrees that improved execution outlook in the core infrastructure segment will likely ease concerns on momentum in large projects secured in the Middle East.Citi has also upgraded the stock to buy with a target price of Rs 1640 per share stating that Q4FY16 could be the turning point for execution. It says that execution/ margins hold the key over the short term given decent existing FY16-end. CLSA has a buy rating with L&T delivering on execution and margins, increased target to Rs 1600 per share on a 3-8 percent hike in earnings per share (EPS). It believes that the stock looks reasonably priced and is a proxy to the domestic capex revival, which is picking up. "We have argued that L&T's margins may remain subdued at the beginning of this cycle as it has begun executing many large long-duration jobs, where it recognises margins only after 25 percent of execution. As the proportion of 'cost jobs' declined on achievement of milestones, in the Infra segment (Riyadh metro) in Q4, E&C margins rebounded 180 bps," it says in a report. Deutsche Bank has upgraded the stock to buy with a target price of Rs 1325 per share. It has raised FY17/FY18 estimates by 15 percent/9 percent to factor the better-than-expected execution and margins in the core engineering business. However, it feels the subdued order inflow environment coupled with longer conversion cycles, uncertainty on commercial shipbuilding business loss as well as high capital costs from commissioning of the Hyderabad metro project could keep earnings growth under 15 percent CAGR over the next two years. At 15:34 hrs Larsen and Toubro ended at Rs 1,470.10, up Rs 178.80, or 13.85 percent on the BSE.Follow @NasrinzStory