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Sharekhan’s research report on Larsen and Toubro

L&T by virtue of its leadership and diversified offerings in the EPC domain would be a key beneficiary of the government’s infrastructure thrust and capex revival in private sectors. Further, increased investments in infrastructure and hydrocarbon in the GCC region provide diverse opportunities. Given strong order book at ~Rs. 3.9 lakh crore (2.2x its TTM revenue) and order prospects of Rs. 4.87 trillion for Q4FY2023, we expect robust execution going forward. Multiple margin tailwinds – easing supply chain, stable commodity prices, and higher margin orders indicate margin recovery from FY2024. Focus on sunrise sectors such as green hydrogen, data centres, e-commerce as well as defence would lead to further diversification.

Outlook

We maintain Buy on L&T with a revised PT of Rs. 2,600 (upgrading our target P/E for the core business), given strong execution and margin tailwinds and improving return rations in the capex upcycle.

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Larsen & Toubro - 09 -03 - 2023 - khan

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