Shares of Larsen & Toubro (L&T) rose 2 per cent to Rs 1,569.75 on the BSE in intra-day trade on Monday after L&T Construction, the construction arm of L&T, secured significant contracts for its various businesses. The stock of the construction and engineering major was trading higher for the third straight day. It was quoting close to its record high level of Rs 1,593 touched on February 2, 2021.
While the company did not disclose the value of the order, it generally classifies them as significant if the value is in the range of Rs 1,000-2,500 crore.
The water and effluent treatment business of L&T Construction has bagged an order from Bangalore Water Supply & Sewerage Board (BWSSB) to design, build and operate sewage treatment plants, intermediate sewage pumping stations along with the construction of main sewers for 110 villages in the Mahadevpura and Bommanahalli region (K&C Valley Catchment) of Bengaluru city. The project is funded by the Japan International Cooperation Agency (JICA).
The heavy civil infrastructure business has secured an order to construct various facilities within 42 months for the Bhabha Atomic Research Centre (BARC) at Tarapur Maharashtra, L&T said in a press release.
Meanwhile, the buildings and factories business has secured an order from a prestigious client for the construction of sports infrastructure facilities in the Kalinga Stadium at Bhubaneswar, Odisha and a new international hockey stadium with 20,000 seating capacity at Rourkela, Odisha in time for the Hockey World Cup 2023, with a total built-up area of 8.45 Lakhs Sq.ft. The fast-track projects are scheduled to be completed in 15 months at Kalinga Sports Complex, Bhubaneswar and 12 months at Rourkela respectively, the company said.
In the past one month, the stock of L&T has outperformed the market by surging 16 per cent, as a strong order book, better prospects and great execution capabilities all point to L&T (ex IT/Fin/Dev. Projects) returning to mid-teen earnings growth, according to analysts. In comparison, the S&P BSE Sensex was up 6 per cent during the same period.
While Covid second wave might delay the overall order inflow for the industry, analysts at Emkay Global Financial Services believe that L&T’s tender pipeline in the last six months has been strong. This would mean that once the intensity of the pandemic comes down, the orders will be back in the system and L&T will be a key beneficiary. L&T has indicated that order prospects at Rs 9.06 trillion for FY22 are up 8.5 per cent year-on-year (YoY).
Improving core ROIC (return on invested capital), strong and clean order book, increased opportunities in renewables, steel and cement apart from rail, expressways and water bode well for future trajectory, the brokerage firm said while maintaining a ‘buy’ rating on the stock with a target price of Rs 1,770 per share.