Motilal Oswal has given Buy recommendation for Larsen and Toubro recommended buy rating on the stock with a target price of Rs 2165 in its research re with a target price of Rs. 2165 in its research report issued on Jan 31, 2022

Motilal Oswal’s research report on Larsen and Toubro

Adjusted PAT declined by 9% YoY to INR20.5b and was in line with our estimate (base year benefitted from bulky Real Estate sales). The company maintained its order inflow/revenue/core margin guidance, though it did highlight some risk of a spillover of order inflows from 4QFY22 into FY23. Adjusted for the HSR order won last year, core E&C order inflows grew 26% YoY to INR380b, with a two-year CAGR of 13%. On the execution front, core E&C domestic revenue grew 13% YoY (two-year at 6%), while international E&C revenue was flat. On the margin front, L&T has done a commendable job, despite commodity price headwinds, with core E&C (excluding Others, to adjust for the bulky Realty business) margin expanding 30bp YoY. We largely maintain our earnings estimate, but cut our TP to INR2,165/share (INR2,295 earlier) to account for mark-to-market (MTM) of listed subsidiaries’ CMP (LTI/LTTS/MTCL has corrected by ~20% each in CY22 YTD).


After adjusting for the subsidiaries’ valuation (~INR950/share), the core E&C business trades at an FY23E/FY24E P/E multiple of 17.3x/15.6x v/s its historical one-year forward average P/E multiple of 22x. L&T remains the best play on the capex cycle in India. We maintain our Buy rating.

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