Larsen & Toubro up for third straight day; stock nears record high

L&T remain optimistic about the Government's intent to complete around 7400 projects as envisaged in the National Infrastructure Pipeline, aggregating to Rs 111 trillion by FY25.

Shares of Larsen & Toubro (L&T) were up 2.4 per cent at Rs 1,549.75 on the BSE in the intra-day trade on Wednesday. The stock of the construction and engineering major was quoting higher for the third straight day. It had hit a record high of Rs 1,593 on February 2, 2021. In comparison, the S&P BSE Sensex was up 0.30 per cent at 52,926 points at 12:48 pm.

L&T on Monday, July 12, informed that the meeting of the board of directors of the Company is scheduled on July 26, 2021 to consider and approve the unaudited financial results of the company for the quarter ended June 30, 2021 (Q1FY22).

Kotak Securities expects L&T's Q1FY22 results to reflect improved execution. "We expect core E&C EBITDA margins to be marginally below levels seen two year ago (Q1FY20). Order inflow for L&T has remained weak during the quarter and focus would now be on revenue growth trajectory," the brokerage firm said in June 2021 quarter earnings preview.

L&T has remained largely range bound in the last couple of weeks. In the past one month, the stock has gained 1.6 per cent, as against a 0.60 per cent rise in the S&P BSE Sensex. From October 2020 to February 2021, the stock witnessed an impressive up move towards Rs 1600. Since then, it has remained largely range bound with time and price based correction.

L&T’s current ex-services orderbook at Rs 3.3 trillion (3.5x TTM ex-services sales) provides growth visibility. Given the restart of ordering activity on large multilateral projects such as high-speed rail, analysts at ICICI Securities believe demand will improve and aid ordering from similar projects in segments like metro, water, etc.

"The infrastructure segment has a 75 per cent share of the L&T’s consolidated order book. Given the scale of India’s infrastructure deficit, we remain optimistic about the Government’s intent to complete around 7400 projects as envisaged in the National Infrastructure Pipeline, aggregating to Rs 111 trillion by FY25. The project pipeline is expected to be collectively funded by the Central Government, State Governments and PSUs to the extent of 79 per cent with the remaining 21 per cent being envisaged to come from the private sector," L&T said in the financial year 2020-21 (FY21) annual report.

The outlook for FY2021-22 is one of cautious optimism, with the country’s GDP regaining positive territory thanks to the base effect in the first half, followed by robust growth in the second. While the current resurgence of COVID-19 may dent prospects in the initial part of the year, vigorous vaccination efforts and improved adherence to safety protocols should spark a revival in the latter half. We therefore believe the recovery is ‘delayed’ and not ‘derailed’, L&T said.