Anand Rathi has given Buy recommendation for Larsen and Toubro with a target price of Rs. 1972 in its research report issued on May 16, 2022
Anand Rathi’s research report on Larsen and Toubro
L&T’s Q4 reflects its robust order inflows (excl. services: 58% y/y) and strong infrastructure division’s revenue growth (~13% y/y), though inflation curbed overall margins (the EBITDA margin contracted 95bps y/y). Order finalization domestically has been delayed with the tender-to-award ratio down to 51% in FY22 (70% in FY21). Despite this, domestic orders were up 28.6% y/y, on the low base, while international order inflow growth was a strong 77% y/y. The company has laid down a strategic plan for FY21-26, where initiatives, investments and focus would help to 11-13% CAGRs in domestic revenue and order inflows. FY23 order prospects are a strong Rs8.53trn.
We expect a sustained double-digit growth momentum, focus on cash-flow generation and execution, and reduced exposure to non-core assets. In the near term, however, the inflationary situation would squeeze margins. We maintain a Buy, with a lower TP of Rs1,972 (a sum-of-parts valuation on FY24e).