Larsen & Toubro gains 4%, hits record high on hopes of strong order inflows

Shares of Larsen & Toubro (L&T) rallied 4.3 per cent, hitting a record high of Rs 1,895 on the BSE in Wednesday’s intra-day trade on expectation of strong orders inflows as the management indicated tender pipeline remains strong at Rs 6.83 trillion, largely from infra and Hydrocarbon.

The stock of construction & engineering giant surpassed its previous high of Rs 1,884.90 touched on October 19, 2021. In past one week, the stock has gained 6 per cent, after the company posted a healthy operational performance for the quarter ended September 2021 (Q2FY22). The company’s order backlog remains strong at Rs 3.3 trillion. In comparison, the S&P BSE Sensex was down 1.5 per cent during the same period.

L&T said it bagged orders worth Rs 42,140 crore during Q2FY22, registering a robust growth of 50 per cent compared with the corresponding period of the previous year. Orders were received in various segments like oil & gas, metros, rural water supply, minerals and metal, public space and power transmission and distribution. The International orders at Rs 22,116 crore during the quarter comprised 52 per cent of the total order inflow, the company said.

Given the strong order backlog and tender pipeline, management has maintained its low-to-mid teen revenue and order inflow growth for FY22. According to analysts, the execution run rate at infra sites is naturally expected to pick up as covid-impact recedes and capex cycle domestically picks up.

L&T’s order inflow is expected to be good in October-March period (H2FY22) given the expected high activity in tendering in and awarding. Order inflow for FY22 is expected to grow at low to mid-teens levels. The company’s revenue is expected to reach normal recurring rate during H2FY22 if there are no third wave in the coming future. Revenue for FY22 is expected to grow at low to mid-teens levels, analyst at Edelweiss Securities said in result update. The brokerage firm retains ‘buy’ rating on the stock with target price of Rs 2,195 per share.

Analyst at Prabhudas Lilladher also maintains ‘buy’ rating on L&T with target price of Rs 2,201 per share. “Considering robust tendering pipeline, ordering activity will continue its growth momentum in the coming quarter. We believe that L&T is well-placed to benefit from pickup in economic activity and private capex given its financial, technical & managerial capability for sustaining and gaining market share,” the brokerage firm said.