Shares of Larsen & Toubro fell more than a percent intraday on November 26 after global brokerage house Credit Suisse downgraded the stock to neutral from outperform earlier, citing slowing orders.
The research house also slashed price target by 16 percent to Rs 1,460 (from Rs 1,750 earlier), implying 5.8 percent potential upside from current levels against the earlier expected upside of 26.8 percent.
"The state government orders have been significantly slower this year so far. Even private sector capex momentum has completely halted," said the brokerage.
Order inflows in the first half of FY20 were driven by chunky hydrocarbons and power segments, but the second half target is stiff at Rs 1 lakh crore, it added.
The engineering and construction major's order inflow for the half-year ended September 2019 stood at Rs 86,992 crore, growing at 16 percent over the corresponding period of last fiscal.
With the surge in order intake, the company had crossed the 3 lakh crore order book milestone with the consolidated order book at Rs 3,03,222 crore as of September 2019.
After earnings, the company maintained its order inflow guidance for FY20 at 10-12 percent over FY19, which means the company needs Rs 1,07,525.4 - 1,11,062.08 crore worth of order inflow in the second half of FY20 to achieve full-year order inflow guidance. In FY19, company's order inflow stood at Rs 1,76,834 crore.
"We build in 6 percent inflows growth, implying a miss. Hence we revised our earnings down by -3.3/-6.1 percent for slower booking," said Credit Suisse, adding valuation de-rating may continue.
The stock corrected 14 percent in the last six months against 1 percent rally in Nifty50 in the same period. It was quoting at Rs 1,363.85, down Rs 16.15, or 1.17 percent on the BSE at 1415 hours IST.Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.