Buy Larsen & Toubro, target price Rs 4,300: Motilal Oswal Financial Services

Motilal Oswal Financial Services has a buy call on Larsen & Toubro with a target price of Rs 4,300. The current market price of Larsen & Toubro Ltd. is Rs 3,624.4. Larsen & Toubro, incorporated in 1946, is a Large Cap company with a market cap of Rs 498064.40 crore, operating in the construction sector.

Larsen & Toubro's key products/revenue segments include Income From Construction Work, Income from Manufacturing and Trading Activities, Other Services, Other Operating Revenue, Property Development, Commission, Service (Engineering) and Lease Rentals for the year ending 31-Mar-2024.

Financials

For the quarter ended 30-09-2024, the company has reported a Consolidated Total Income of Rs 62655.85 crore, up 11.80 % from last quarter Total Income of Rs 56040.46 crore and up 20.13 % from last year same quarter Total Income of Rs 52157.02 crore. The company has reported net profit after tax of Rs 4112.81 crore in the latest quarter.

Investment Rationale
Larsen & Toubro (LT)?s results came ahead of Motilal Oswal Financial Services' estimates, primarily led by better than-expected order inflow and execution, decent margin performance, further decline in NWC, and improving RoEs. The company reported 21%/13%/5% YoY growth in revenue/EBITDA/PAT on a consolidated basis. The core E&C revenue growth at 28% YoY continued to outperform in 2QFY25 too, vs. guidance of mid-teens growth for the full year. Core E&C margins improved slightly YoY.

Further support for execution growth and margins will come from improved execution in the coming quarters. Though a large part of inflows during the quarter were driven by international projects, it has hedged the company very well against weaker domestic inflows. Beyond the core business, L&T is also focusing on building up newer initiatives such as electrolyzers, semiconductors, data centers, and nuclear technology, as well as tofurther grow its real estate business. The brokerage has tweaked its estimates to factor in L&T?s improved execution. They have reiterated a BUY with a revised SoTP-based target price of Rs 4,300.