L&T's in-line Q4 results keep brokerages positive, but weak guidance prompts target price cuts

L&T expects India's economic growth momentum to continue in the medium term facilitated by both public and private capital investment.

Larsen and Toubro's (L&T) in-line performance in the quarter ended March 2024 prompted brokerages to maintain their bullish calls on the stock. They remain positive about the company's growth prospects and are particularly bullish given the strong order inflows and robust core execution.

However, CLSA and Kotak cut the target price on L&T due to weak guidance, risks due to elections, and West Asia uncertainty.

L&T reported a rise of 10.3 percent in net profit at Rs 4,396 crore for Q4FY24. The multinational infrastructure conglomerate's revenue from operations in the quarter rose 15 percent to Rs 67,078.7 crore.

At 9:19 am, shares of L&T were trading 5.2 percent lower at Rs 3,308.25 on the National Stock Exchange (NSE).

Follow our market blog to catch all the live action

The infrastructure conglomerate has become the sixth private firm from the non-financial sector to report a full-year revenue of at least Rs 2 lakh crore. The company’s revenues for FY24 increased by 21 percent to Rs 2.21 lakh crore, aided by the execution of a large order book in the Projects & Manufacturing businesses.

CLSA has retained a 'buy' call on L&T but has reduced the target price to Rs 4,151 per share. According to the brokerage, a significant positive for L&T in FY24 was surpassing order inflow guidance by a considerable margin.

Additionally, new orders rising nearly 40 percent and the company's robust core execution going up by 27 percent were also among key achievements.

L&T's outlook is improving, with a $146 billion order pipeline, up by 24 percent on-year, despite the expected slowdown in West Asia's capital expenditure, CLSA noted.

At Rs 95,086 crore, revenues from international business constituted 43 percent of L&T’s total revenues in FY24. The increased overseas revenue was largely driven by a ramp-up in the execution of multiple international projects.

During the year, the company received orders worth Rs 3.02 lakh crore at the group level, registering a robust YoY growth of 31 percent.

Also Read | L&T Q4 net profit rises 10% to Rs 4,396 crore, in line with estimates; declares Rs 28 dividend

Bernstein has maintained an 'Outperform call on the stock with a target price of Rs 3,800 per share as analysts believe that the fourth-quarter performance was broadly in line with expectations.

Although there was a slight dip in order inflow compared to the previous year, the company's strong working capital position emerged as a key highlight, the brokerage said.

However, it noted that the margin guidance provided by L&T turned out to be lower than anticipated. Despite this, the order inflow guidance for FY25 is perceived as better than expected, standing at a projected 10 percent increase compared to the anticipation of flat orders.

According to analysts at Bernstein, elections and uncertainties in the West Asia region are potential risks to the guidance.

Also Read | L&T Q4 results: Siddhartha Mohanty appointed as Director; to take charge from May 28

Kotak Institutional has retained a 'Sell' call on L&T and cut the target price by Rs 100 to Rs 3,000 per share. It highlighted the 4 percent miss in the core Engineering & Construction (E&C) EBITDA and standalone infrastructure margin being down by 100 basis points.

Additionally, the flat core margin guidance is weak. Moreover, the overseas ordering guidance shows a decline of more than 25 percent. According to the brokerage, the weak parts of guidance from the L&T management do not come as a big surprise.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.