L&T surges 4%; hits new high on strong Q1 results, Rs 10,000 crore buyback

Shares of Larsen & Toubro (L&T) hit a new high of Rs 2,670, surging 4 per cent on the BSE in Wednesday’s intra-day trade after the engineering conglomerate on Tuesday announced a buyback of up to Rs 10,000 crore. The company would entail 33.3 million equity shares for a price of up to Rs 3,000 each, via tender offer route, subject to approvals. The board also declared a special dividend of Rs 6 per share.

At 09:30 AM; L&T was trading 3.6 per cent higher at Rs 2,654.85, as compared to 0.41 per cent rise in the S&P BSE Sensex. The stock surpassed its previous high of Rs 2,634.05, touched on July 24.

Meanwhile, L&T reported a better-than-expected 46.5 per cent year-on-year (YoY) rise in net profit of Rs 2,493 crore for the June quarter (Q1FY24), on the back of improved operational performance and higher other income.

Net sales were at Rs 47,882 crore, up 33.6 per cent from a year ago but down nearly 18 per cent sequentially. “The Q1FY24 performance is on the back of a robust top-line and bottom-line growth, supported by excellent balance sheet management, resulting in improved return ratios,” said S N Subrahmanyan, chief executive officer and managing director for the company.

L&T’s order book crossed the Rs 4-trillion mark for the first time. L&T’s order inflow for Q1FY24 was up 57 per cent at Rs 65,520 crore, which the company attributed to strong ordering movement in the domestic infrastructure segment and from the renewable energy and hydrocarbon segment of the Middle East market.

The order inflows were strong from all segments like Railways, Renewables, Power T&D, Hydrocarbons. The surprise came in from the ordering prospect pipeline which stood at Rs 10.7 trillion vs Rs 7.52 trillion, up 34 per cent YoY and Rs 9.73 trillion QoQ and strong inflow growth in Q1FY24. The company has retained its order inflow growth and revenue guidance.

ICICI Securities expect L&T to deliver 17 per cent and 26 per cent CAGR in standalone revenues and profit after tax over FY23-FY25E. Strong ordering pipeline, pick up in execution and almost bottomed up margins coupled with relatively reasonable valuations makes L&T the best capex play. The strong focus to enhance ROE’s to 18 per cent by FY27 will certainly lead to rerating of the stock in the medium term.

Analysts at Jefferies expect 1HFY24E to bring order flow traction as elections drive front-loaded order flow; 2H should benefit from margin recovery as the execution of projects won in an inflated commodity price environment picks up.  Both of L&T’s key geographies, India and the Middle East are seeing capex traction, the brokerage firm said.