Buy L&T, target price Rs 1,035: ICICI Securities
The SoTP comprises the value of the standalone business at Rs 419, and that of other subsidiaries, associates and BOT assets at Rs 616 per share.
By ETMarkets.com | Updated:
ETMarkets.com
ICICI Securities has given a buy rating to Larsen & Toubro Ltd with a SoTP target price of Rs 1,035.
During the recent announcement of the stimulus package, Finance Minister Nirmala Sitharaman elaborated on plans for indigenisation of defence, investment in airports, upgradation of industrial infrastructure and revamped viability gap funding for social infrastructure. Though these will be steps in the right direction, the brokerage prefers to wait for more details given that most of these plans were already on the anvil.
Given the fiscal constraints,the government is inviting more private sector investments in sectors, which earlier used to be dominated by the government. Defence has been a priority since 2014, but we have not seen much of the plans getting translated on ground. The brokerage believes Larsen and Toubro will be a key beneficiary of the reforms as it is internally geared up for the opportunity.
Investment Rationale
Though there are near-term concerns due to the macro slowdown, L&T can sail through on the back of: 1) its strong balance sheet; 2) cash flow from deal with Schneider Electric, and 3) overall diversified opportunity spectrum. Tackling the near-term impact in terms of the migrant labour exodus will be a key challenge for the company. The brokerage maintains a buy rating with an unchanged SoTP target price of Rs 1,035. The sum of the part comprises the value of the standalone business at Rs 419, and that of other subsidiaries, associates and BOT assets at Rs 616 per share.
Financials
Promoter/FII Holdings
FIIs held 18.78 per cent stake in the company as of March 31, 2020, while DIIs held 37.63 per cent and public and others 43.52 per cent.
During the recent announcement of the stimulus package, Finance Minister Nirmala Sitharaman elaborated on plans for indigenisation of defence, investment in airports, upgradation of industrial infrastructure and revamped viability gap funding for social infrastructure. Though these will be steps in the right direction, the brokerage prefers to wait for more details given that most of these plans were already on the anvil.
Given the fiscal constraints,the government is inviting more private sector investments in sectors, which earlier used to be dominated by the government. Defence has been a priority since 2014, but we have not seen much of the plans getting translated on ground. The brokerage believes Larsen and Toubro will be a key beneficiary of the reforms as it is internally geared up for the opportunity.
Investment Rationale
Though there are near-term concerns due to the macro slowdown, L&T can sail through on the back of: 1) its strong balance sheet; 2) cash flow from deal with Schneider Electric, and 3) overall diversified opportunity spectrum. Tackling the near-term impact in terms of the migrant labour exodus will be a key challenge for the company. The brokerage maintains a buy rating with an unchanged SoTP target price of Rs 1,035. The sum of the part comprises the value of the standalone business at Rs 419, and that of other subsidiaries, associates and BOT assets at Rs 616 per share.
Financials
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For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 36242.68 crore, up 2.59 per cent from last quarter sales of Rs 35328.45 crore and up 1.49 per cent from last year's same quarter sales of Rs 35708.87 crore. The company reported net profit after tax of Rs 2703.57 crore in the latest quarter.Promoter/FII Holdings
FIIs held 18.78 per cent stake in the company as of March 31, 2020, while DIIs held 37.63 per cent and public and others 43.52 per cent.
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