L&T gains 3% as Q1 profit, sales beat estimates; Rs 10,000 crore-share buyback cheers investors

Shares of Larsen and Toubro (L&T) rose 3 percent on July 26, as investors cheered the engineering and construction major’s stellar set of quarterly numbers coupled with a 57 percent YoY growth in order inflow and share buyback plan.

L&T posted a 47 percent YoY rise in consolidated net profit to Rs 2,493 crore for the June quarter. Revenue from operations was up about 34 percent at Rs 47,882 crore. Both revenue and net profit surpassed estimates.

As per an average of four brokerage firms by Moneycontrol, L&T’s consolidated revenue for the June quarter was expected to rise 14 percent YoY to Rs 40,813 crore while net profit was to grow 24 percent to Rs 2,110 crore.

At 9:16 am, shares of the company were trading 2.6 percent higher at Rs 2629.45 on the BSE.

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Besides, the company’s board has also approved a share buyback of Rs 10,000 crore. During a conference call with analysts and media, L&T’s Chief Financial Officer R Shankar Raman said he does not expect the Securities and Exchange Board of India (SEBI) to deny L&T permission to go ahead with its buyback this time.

He added the price at which L&T will complete its buyback has not been finalised yet and the tentative price of Rs 3,000 per share is the maximum price being considered by L&T at the moment. Raman also said that once the shareholder’s approval for the buyback is received, L&T will decide on a date for the buyback and final price.

Further, the company said the order inflow for the quarter ended June 30, 2023 stood at Rs 65,520 crore, registering a growth of 57 percent over the corresponding quarter of the previous year.

In another development, the company’s board has given approval to invest Rs 506 crore in its subsidiary L&T Energy Green Tech Ltd, and also agreed to acquire the entire 40 percent stake held by Sapura Nautical Power Pte in their joint venture L&T Sapura Offshore Private Ltd.

Read more | L&T Q1 results: Operating margins from infra segment expected to rise from January-March quarter, says CFO

What analysts say

CLSA highlighted that the key surprise in Q1 was mega renewable orders and core execution. Even Morgan Stanley sees L&T’s execution in core business as a surprise.

L&T has witnessed strong inflow and stellar execution, CLSA highlighted while keeping a ‘buy’ call on the infrastructure major’s stock with a target price of Rs 3,080.

Meanwhile Jefferies expects first half of FY24 to bring order flow traction as elections drive front-loaded order flow. It believes second half should benefit from margin recovery as execution of projects pick up. Jefferies has a ‘buy’ rating with target price being raised to Rs 3,050.

Morgan Stanley reiterated that the company has revised its core revenue growth estimate for FY24 to 18 percent from 15 percent. Whereas core margin outlook remains the same but the management expects improvement in the second half of FY24, Morgan Stanley noted.

L&T’s Chief Financial Officer R Shankar Raman also told in a conference call with analysts and media, that the company is likely to meet the higher end of its revenue and order inflow guidance for 2023-24 and may consider revising its guidance for both revenue and operating margin after December 2023.

Morgan Stanley has an ‘overweight’ rating with a hike in target price to Rs 2,850.

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