What should investors do with L&T post Q4 result: buy, sell or hold?

The company reported a consolidated profit of Rs 3,292.81 crore for the quarter ended March 2021.

May 17, 2021 / 09:30 AM IST
 
 
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Larsen and Toubro (L&T) share price fell over 2 percent in early trade on May 17 after the company declared its March quarter earnings.

Engineering and infrastructure major on May 14 reported consolidated profit at Rs 3,292.81 crore for the quarter ended March 2021, registering a 3 percent growth compared to the year-ago quarter.

Profit from continuing operations at Rs 3,820.16 crore increased 11.4 percent YoY in Q4. Higher tax cost (up 116 percent YoY to Rs 2,086.71 crore) and lower-than-expected revenue growth impacted profitability.

Also Read - L&T Q4 result: Profit rises 3% to Rs 3,293 crore, order inflow drops 12% to Rs 50,651 crore

Here is what brokerages have to say about the stock and company after March earnings:

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Motilal Oswal | Rating: buy | Target: Rs 1,700

We broadly maintain our consolidated earnings estimate. We expect L&T to witness Core E&C revenue/EBITDA/adjusted PAT CAGR of 12%/11%/17% over FY21-23E. Our estimates largely account for commodity price inflation risk. Our consolidated revenue/EBITDA/adjusted PAT CAGR estimate stands at 14%/17%/28% over FY21-23E, helped by lower losses in the Hyderabad Metro.

Prabhudas Lilladher | Rating: Buy | Target: Rs 1,604

We believe that L&T is well-placed to emerge stronger given its financial, technical and managerial capability for sustaining and gaining market share. Given the strong tender pipeline and healthy order book, we have revised our earnings upwards for FY22E/23E by 4.5%/5.8%. Target price is revised upwards owing to revision in earnings and target market capital of its holdings companies.

Dolat Capital | Rating: Buy | Target: Rs 1,718

Our FY23E EPS estimates remain unchanged, while we cut our FY22e EPS estimates by 7% to factor in the impact of restricted business activities especially in H1FY22 due to the lockdown.

ICICI Direct | Rating: Buy | Target: Rs 1,700

L&T reported decent order inflows while execution improved amid onsite productivity and supply chain normalisation leading to better margins. Also, better collections improved the working capital situation while cash proceeds from E&A have provided much-needed liquidity comfort and the ability to further repay the debt.

We expect L&T to deliver standalone revenue CAGR of 12%, EBITDA CAGR of 11.8% and PAT CAGR of 15.1% in FY21-23E.

Sharekhan | Rating: Buy | Target: Rs 1,795

L&T’s strong operational performance along with healthy guidance related to execution, order intake and working capital requirement for FY2022 are key positives emerging out of Q4FY2021 results. The international outlook looks promising for developed economies as they seem to recover faster from the COVID-19 pandemic, while GCC countries are expected to pick up investments with oil staying above USD 60.

Bernstein | Rating: Outperform | Target: Rs 1,708

The Q4 was respectable with strong cash flows & improved margins, still guidance of mid-teens growth for orders & revenues. The message of significant optimism & control over the business will please the markets.

Goldman Sachs | Rating: Buy | Target: Rs 2,000

It was a strong performance with optimistic commentary. All indicate strong discipline & focus on profitability, while stars are aligning for the next leg of capex uptick in India.

Nomura | Rating: Buy | Target: Rs 1,654

It was a strong delivery on core margins/cash flows. The sales rebounded sharply in FY22. The near-term EBITDA margin is susceptible to rising commodity prices.

Nomura cut FY22 profit by 2% on near-term execution headwind in Q1FY22. The strong order book & higher services will drive growth into FY23, it said.

Kotak Institutional Equities | Rating: Buy | Target: Rs 1,850

The stage is set for the company to deliver high-teens profit CAGR over FY20-23. We do not expect hiccups along the way given the strength of the backlog.

JPMorgan | Rating: Overweight | Target: Rs 1,815

The execution headwinds to be transient. The commodities are not proving to be an unmanageable concern. JPMorgan cut the FY22/23 EPS estimate by 3/4%. The focus on recycling balance sheet & achieving 18% RoE are the key positives.

Morgan Stanley | Rating: Overweight | Target: Raised to Rs 1,816

The guidance will be a discussion point but it’s delivered in far tougher fiscal. The flat margin is a positive outcome, however, the valuations remain compelling.

At 09:22 hrs, Larsen & Toubro was quoting at Rs 1,387.20, down Rs 28.30, or 2 percent on the BSE.

The share touched a 52-week high of Rs 1,593 and a 52-week low of Rs 791.55 on 02 February, 2021 and 19 May, 2020, respectively.

Currently, it is trading 12.92 percent below its 52-week high and 75.25 percent above its 52-week low.

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.
Moneycontrol News
first published: May 17, 2021 09:30 am

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