L&T stock rises on strong Q2 results, bullish analysts, but profit-booking pares gains

Larsen & Toubro (L&T)’s net profit during the second quarter of fiscal year 2023-24 jumped 45 percent year-on-year to Rs 3,223 crore.

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Shares of Larsen and Toubro opened around 1.5 percent higher at Rs 2,972.55 on November 1 after analysts raised the target prices and estimates following strong Q2FY24 earnings. But, by 9:40am, the stock lost some of its early gains as investors rushed to book profit, driving the stock at Rs 2,930.15.

Prabhudas Lilladher analysts gave the group a ‘buy’ rating with a revised target price of Rs 3,437 (from Rs 3,302 earllier) said that they were optimistic that the engineering company was well-placed to benefit in the long run due to strong tender prospects, better order conversion in domestic market, significant traction in hydrocarbon and renewable energy orders from international markets like Saudi Arabia along with an expected uptick in private capex in domestic market.

The brokerage has revised its FY24 and FY25 estimates to factor in “improved performance of Hyderabad Metro, strong order book and tender prospects”.

Strong Earnings

Larsen & Toubro (L&T) recorded a 45 percent jump in net profit for the second quarter of fiscal year 2023-24 to Rs 3,223 crore, as per the financial results declared by the company on October 31. L&T reported a 19 percent rise in consolidated revenue for Q2FY24 to Rs 51,024 crore from Rs 42,763 crore a year back. Earnings before interest, taxes, depreciation and amortisation (EBITDA) margin declined around 40 basis points to 11 percent in Q2FY24 from 11.4 percent in Q2FY23.

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Analysts at Jefferies have given L&T a ‘buy’ call and raised the target price to Rs 3,400 per share. According to the brokerage, while the Q2 EBITDA was lower than expected, the order flow was strong.

During the reporting quarter, L&T won orders worth Rs 89,153 crore at the group level during Q2, a 72 percent growth over the previous fiscal.

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The L&T management said that it has revised the margins to 8.5-9 percent from 9 percent earlier. Analysts at Jefferies say that if projects reach the margin recognition levels earlier, this cut could surprise.

Analysts at InCred have given L&T an Add rating and raised the target price by Rs 3,300 per share as the company’s EBIDTA and net profit beat estimate.

Also read: L&T Q2 results: Profit jumps 45% to Rs 3,223 crore, revenue up 19% at Rs 51,024 crore

In a post-earnings media interaction, the company said that it “expects growth momentum in the Indian market to continue on the back of sustained buoyancy in services, consumer and business optimism, higher government spending, healthy balance sheets of banks and corporates, upcoming festive season demand and supply chain normalisation.”

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