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)