Larsen & Toubro hits over 9-month low, slips 18% from September high

The stock was trading at its lowest level since February 26, 2019

Shares of Larsen & Toubro (L&T) continued to trade under pressure on Wednesday and dipped 2 per cent to hit an over nine-month low level of Rs 1,256 on the BSE over concerns of lower order inflow and revenue growth.

The stock of construction & engineering major was trading at its lowest level since February 26, 2019. It slipped 18 per cent from its recent high level of Rs 1,528 on September 29, as compared to 3 per cent rise in the S&P BSE Sensex. The stock is 4 per cent away from its 52-week low of Rs 1,202 on February 14.

While announcing the September quarter results on October 23, the company's management maintained its earlier guidance to end the year with a 10 per cent to 12 per cent year-on-year growth in order inflow.

However, analysts revisited order inflow assumption to factor in risks of capex cuts and the likely delay in order awarding from the Maharashtra government post the change of government in the state. Over the past year, the Government (Centre and the States) has seen a worsening of fiscal stress, driving a slowdown in public infra capex.

“The orders worth Rs 16,000 crore pertaining to Andhra Pradesh and the Mumbai Coastal Road project are slow-moving currently. Additionally, we suspect near-term slowdown in construction activity in Maharashtra state owing to state elections and delay in formation of a new government”, analysts at Motilal Oswal Securities said in company update.

“Our monthly infra tracker suggests that tenders are still down 41 per cent year to date FY20 as of November 2019, indicating that order activity will likely remain low for H2FY20. Thus, despite a strong order inflow momentum in H1FY20 for L&T, we foresee a potential for lowering the guidance in Q3FY20 to 8-10 per cent growth from the current 10-12 per cent growth in order inflows,” analyst at Emkay Global Financial Services said in a note.