CLSA sees further 10% rise in L&T as buyback to boost return on equity

CLSA is optimistic about L&T given the rising project inflow, highest ever backlog and improving execution. It said margin expansion is likely in the second half of FY24 and buyback will drive up Return on Equity (RoE).

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Broking agency CLSA has a ‘buy’ recommendation on Larsen & Toubro (L&T) with a target price of Rs 3,240, which implies an upside potential of 10 percent from today’s high.

At 9:30am, shares of the company were trading 0.2 percent lower at Rs 2,936.85 on the BSE.

The brokerage firm is optimistic about L&T given the rising project inflow, highest ever backlog and improving execution. It said margin expansion is likely in the second half of FY24 and buyback will drive up Return on Equity (RoE).

The engineering major is ‘walking the talk’ on its RoE focus with a buyback price of Rs 3,200 per share, said CLSA. The company announced on September 11 that it has increased the buyback price to Rs 3,200 per equity share from Rs 3,000 per equity share.

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R Shankar Raman, the whole-time director and CFO of L&T, emphasised L&T’s commitment to boosting its Return on Equity (RoE). In fact, one of the central goals outlined in the company’s five-year strategic plan, ‘Lakshya 2026’ is to enhance shareholder value by optimising the RoE.

The capital expenditure cycle has begun well with large and complex projects, the brokerage firm said while adding that the company’s biggest opportunity in FY24 is in the Middle Eastern hydrocarbon projects.

L&T is on path to net zero, green business and improving visibility for each environmental, social and governance metrics, the brokerage firm said.