Buy Larsen and Toubro; target of Rs 2955: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Larsen and Toubro has recommended buy rating on the stock with a target price of Rs 2955 in its research report dated July 26, 2023.

Broker Research

July 27, 2023 / 17:19 IST

Buy

26 Aug, 2025 12:21

Volume

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Prabhudas Lilladher's research report on Larsen and Toubro

Larsen & Toubro (LT) reported healthy set of quarterly performance with consolidated revenue growth of ~34% YoY, while margins contracted 86bps YoY, due to business mix and legacy project reaching completion. Margins are likely to improve from H2FY24, with legacy orders likely to be completed by Q2/Q3FY24 and new projects reaching margin recognition threshold. NWC to sales improved to 17% in Q1FY24 vs 20.6% in Q1FY23, owing to strong cash collections with FY24 guidance maintained at 16-18%. Tender prospects from infrastructure stands at Rs5.85trn, Hydrocarbon-Rs3.47trn, Power-Rs0.45trn and Hi-Tech-Rs0.29trn. Management is confident to achieve its ROE target of 18%+ by FY26, driven by strong business outlook, prudent balance sheet management and returning surplus cash to shareholders (announced Rs100bn buyback & special dividend). We believe L&T is well-placed to benefit in long run with 1) strong tender prospects, 2) better order conversion in domestic market, 3) significant traction in hydrocarbon and 4) renewable energy orders from international markets like Saudi Arabia and expected uptick in private capex in domestic market. The stock is currently trading at PE of 29.1x/24.4x FY24/25E.

Outlook

Maintain ‘BUY’ rating with revised SoTP of Rs2,955 (Rs2,615 earlier), valuing core business at PE of 22x FY25E, (21x earlier), given strong revenue visibility, prudent NWC management and improving Hyderabad Metro operational performance.

For all recommendations report, click here