Motilal Oswal's research report on Larsen and Toubro
L&T's core E&C business remains best placed to benefit from any capex upcycle, supported by its leaner asset-light business model and diversified segments. Therefore, although the Buildings and Power segments were weaker in FY21, this was largely offset by strong orders from the international Power T&D and Hydrocarbons segments. L&T's capability to win large ticket size projects, such as airports and high-speed rail (HSR), has been remarkable and has compensated for its exit from the Roads sector.
Outlook
In the past month, L&T Infotech has rallied ~18%, MindTree ~28%, and L&T Technology Services ~11%. Factoring in the current market prices of the listed subsidiaries (after applying an unchanged holding company discount of 20%), our TP for L&T now stands at INR1,950. Adj. for the valuation of subsidiaries, the core business is available at FY23E PE of 13.5x v/s the long-term one-year forward average PE multiple of 22x. We maintain a Buy rating. L&T is our top pick in the wider Capital Goods sector as a proxy to play India's capex story.
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