Prabhudas Lilladher has given Buy recommendation for Larsen and Toubro with a target price of Rs. 2091 in its research report issued on May 12, 2022

Prabhudas Lilladher’s research report on Larsen and Toubro

Larsen & Toubro (LT) reported reasonable set of quarterly performance with consolidated revenue growth of 9.9% YoY and NWC to sales improving to 19.9% in FY22 vs 22.3% FY21, led by strong focus on collection. EBITDA margin declined 95bps YoY to 12.3%, impacted due to commodity inflation, delay in claims from customers and job mix. During the quarter, government of Telangana approved soft loan of Rs30bn towards Hyderabad metro and L&T is also looking for equity investor to reduce debt. Tender pipeline remains strong at Rs8.5trn, of which Infrastructure comprises Rs5.72trn (domestic Rs4.57trn). Given strong OB and tender pipeline, management guided for revenue and order inflow growth of 12-15% and core EBITDA margin to be ~9.5%. for FY23. L&T came out with its strategic plan FY22-26 which highlights revenue/order inflow CAGR of 15%/14% between FY21-26 and ROE of +18% by FY26. We believe that L&T is well-placed to benefit from pickup in economic activity and private capex given its financial, technical & managerial capability for sustaining, gaining market share and focus on divestment of non-core assets. Given the strong international outlook from infrastructure as well as hydrocarbon segment, prospect pipeline and continued execution momentum we expect revenue and PAT CAGR of 10.1% and 17.2% from FY22-24E.


The stock is currently trading at PE of 20.2x/18.1x FY23/FY24E. We maintain our ‘Buy’ rating on stock with revise TP of Rs2,091 (Rs2,357 earlier), factoring in revised valuation for subsidiary businesses.

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