L&T gains nearly 2% after Q1 PBT plunges 66% YoY; brokerages remain bullish

Shares of Larsen & Toubro (L&T), the infrastructure and construction major, gained nearly 2 per cent on the BSE on Thursday, a day after the company posted a 66 per cent year-on-year (YoY) crash in its profit before tax (PBT) for the April to June 2020 quarter (Q1), owing to the disruption caused by the Covid-19-induced lockdown.

At 09:36 am, the stock was trading 1.22 per cent higher at Rs 932.20 on the BSE. It hit a high of Rs 937.80 (up 1.82 per cent) so far in the trade against yesterday's close of Rs 920.95. In comparison, the S&P BSE Sensex was trading flat at 37,929 levels, up 0.15 per cent. 

L&T's stock had hit a 52-week high of Rs 1,554.05 on September 23, 2019 while its 52-week low stands at Rs 661.05, hit on March 23 this year. 

For the June 2020 quarter, the company reported a PBT of Rs 894.46 crore for Q1FY21, down from Rs 2,655.23 crore in Q1FY20. Net profit came in at Rs 303.14 crore, which was 79 per cent lower than Rs 1,472.58 crore last year, while revenue stood at Rs 21,259.97 crore, witnessing a dip of 28 per cent. CLICK TO READ FULL REPORT

Further, the management refused to provide any guidance. However, executives indicated a revenue ramp-up would take a couple of quarters more.

L&T booked orders worth Rs 23,574 crore — a 39 per cent drop from the Rs 38,700 crore in Q1FY20. The decline in new orders, said L&T, was caused by low interest towards fresh investment and deferment in award decisions.

Of the new orders, 15 per cent came from the private sector.

Analysts at JP Morgan, as per reports, have maintained an "overweight" rating on the stock with the target price of Rs 1,115/share. The brokerage notes that muted core order inflows in the quarter under review was on the expected lines while a dip in core EBITDA margin was lower than expected. However, the cash flow management by the company was strong. 

Goldman Sachs, too, has maintained "Buy" rating on the stock with the target price of Rs 1,110. It notes that lower costs drove above expectation results and it looks for more colour on the resumption of ordering activity.

Macquarie notes that the company's core engineering and construction (E&C) was better than expected while credit provisions in L&T Finance impacted earnings. It also has " outperform" rating on the stock with the target price of Rs 1,340. 

Another global brokerage firm, CLSA, notes that there are early signs of pickup in the ordering activity. It further notes that order inflows and operating margins of the company have surprised while the International business has reduced stress.