l&t share price: L&T shares jump 4% to 52-week high post Q1, buyback announcement. How to trade now?

Larsen & Toubro (L&T) shares shot up over 4% to hit their 52-week high of Rs 2,670 on the NSE on Wednesday following June quarter earnings and the announcement of share buyback. L&T was the top gainer in the Nifty50 pack in the morning session, garnering strong buying action as nearly 21 lakh shares changed hands around this time.

Top brokerages Jefferies and Kotak Institutional Equities have come out with their views on the stock. While the former has a ‘Buy’ stance, the latter recommended ‘Reduce’, calling the valuation expensive.

L&T reported a 46.5% year-on-year (YoY) growth in consolidated net profit for the quarter ended June 2023 to Rs 2,493 crore. Consolidated revenue increased a sharp 34% to Rs 47,882.37 crore. The net profit and sales were way higher than the ET Now poll of Rs 2,138 crore and Rs 41,023 crore, respectively.

The company board has recommended a special dividend payout of Rs 6 a share and has fixed the record date for the same as August 2 while approving a share buyback worth Rs 10,000 crore through the tender offer route.

This is what they recommended:

Jefferies: Buy | Target: Rs 3,050
Jefferies has recommended a ‘Buy’ on L&T stock for a price target of Rs 3,050. Buyback quantum shows confidence in future cash flow generation and the company needs to post growth of just 2% in the next 9M to meet guidance of FY24 growth of 12% (upper end of guidance). H2 should benefit from margin recovery as the ex-execution of projects won in an inflated commodity price environment picks up.

Valuations point to re-rating in a historical context. Both of L&T’s key geographies, India and the Middle East are seeing capex traction, it said, valuing core E&C at 16X FY25E EV/EBITDA (consol PB of 4.1x and 26.9x PE FY25E) versus Rs 2,915 earlier (15x FY25E). Government infra spend focus is reducing, the report added.

Kotak Institutional Equities: Reduce | Target: Rs 2,400
Kotak recommended ‘Reduce’ on L&T arguing that the valuations remain expensive at 28X/23X one/two-year forward core E&C EPS. L&T reported a sharp 12% beat in core E&C EBITDA in spite of sub-par margins, the report said. Healthy ordering levels boosted growth visibility for attaining the higher end of the unchanged business guidance range. “We increase our ordering estimates by 4% and FV by 9% to Rs 2,400 on roll-forward,” Kotak said in a note.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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