Larsen & Toubro (L&T) share price shed over 2 percent in the early trade on January 31 after the company declared its December quarter earnings.
Larsen & Toubro on January 28 reported a 17 percent on-year decline in its consolidated net profit to Rs 2,055 crore for the quarter ended December 2021.
The decline in the bottomline is largely on account of a higher base in the year-ago quarter which included the sale of commercial property in the realty business and gain on divestment from discontinued operations of the electrical and automation business.
The country's largest infrastructure company, however, reported an 11 percent on-year growth in consolidated revenues to Rs 39,563 crore during the quarter in review.
Here is what brokerages have to say about the stock and the company after the December quarter earnings:
Broking house Jefferies has maintained 'buy' call on the stock but cut the target price to Rs 2,675 from Rs 2,845 as the Q3 EBITDA was 5 percent below expectations as E&C revenue execution rose 9 percent YoY.
The order flow disappointed at 9MFY22, slips 5 percent YoY, while 13-17 percent YoY FY22 order flow growth guidance was maintained.
The broking house believes H2FY22 has triggers of guidance being met.
The research firm has kept 'overweight' call and cut the target to Rs 2,160 from Rs 2,300. The prospects, execution outlook appear solid, despite Q3 miss, it said.
The long-awaited growth pick-up versus muted orders may weigh on the stock in the near term.
JPMorgan is positive on its growth outlook, free cash potential and strategic initiatives.
The brokerage house has maintained the 'buy' call with a target at Rs 2,460 as the Q3 was in-line and strong order inflow prospects for Q4.
The Q3 underline a healthy ordering environment along with the ability to win orders. The prospect pipeline for Q4 is at a multi-year high at Rs 3.9 lakh crore.
The stock is attractively priced and it remains the top pick, said Citi.
The research house has maintained the 'outperform' call on the stock with a target at Rs 2,450.
It revised the FY22/23/24 EPS estimates to Rs 68/93/114 from Rs 77/99/119. The upside could originate from lower interest cost and asset sales/restructuring.
Kotak Institutional Equities
The brokerage house has kept the 'buy' call with a target at Rs 2,450 after in-line print with strength in IT business covering for weakness in core business margin.
Improving refinancing of Hyderabad Metro debt boosts prospects of medium-term returns.
Kotak Institutional Equities cut core business estimates by 4 percent and retain target on higher value of IT business.
The research house believes that L&T is well-placed to benefit from a pickup in economic activity and private capex given its financial, technical and managerial capability for sustaining and gaining market share.
It has cut the earnings estimate for the company by 4 percent for FY22 factoring in lower margins and other income, while kept it unchanged for FY23/24.
"We roll over our target price to FY24E with a ‘buy’ rating and revise target price to Rs 2,382 (Rs 2,201 earlier)," it said.
Healthy operational performance despite supply chain challenges, a strong rise in order prospects for Q4FY2022 along with retaining guidance related to execution, order intake, OPM and working capital for FY2022 are key positives from the Q3FY2022 results.
International outlook looks buoyant with a pick-up in crude oil prices.
On the longer term, L&T remains at the forefront to reap benefits from the AtmaNirbhar Bharat Scheme with its diversified businesses across sectors such as defence, infrastructure, heavy engineering, and IT.
The company remains the best proxy for domestic capex and an improving business environment. "We maintain a 'buy' rating on the stock with a revised SOTP-based price target (PT) of Rs 2,270 factoring upwardly revised valuation of its key IT&ES subsidiaries and favourable core business valuation," it said.
We maintain our earnings estimate, but decrease our target price to R 2,165/share (Rs 2,295 earlier), to account for MTM of listed subsidiaries’ CMP (holding company discount of 20%) and an unchanged target P/E multiple of 20x for the core business.
The analysis firm estimates an FY21-24E EPS CAGR of 25 percent, led by 15 percent CAGR in the core E&C business and reducing losses from the Hyderabad Metro.
"Should the stock revert to its historical average trading multiple of 22x, our target price for the stock will increase to Rs 2,285. L&T remains the best play on a capex cycle in India. We maintain our 'buy' rating," it said.
At 9:19am, Larsen & Toubro was quoting at Rs 1,857, down Rs 41.80, or 2.20 percent on the BSE.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.