Engineering major Larsen & Toubro (L&T) achieved a remarkable milestone as its shares surged by 4.4% in a single day, reaching an all-time high of Rs 2,673.85 per share. This significant jump in share price came on the back of the company’s strong quarterly results and a robust order book, which delighted investors and propelled L&T to become the top gainer on the Nifty 50 index.
During the latest quarter, L&T reported a surprising 46.5% increase in its profit, a positive development that was warmly welcomed by shareholders. Building on this success, the company’s board of directors decided to initiate a share buyback program worth Rs 10,000 crore, along with announcing a special dividend of Rs 6 per share. As part of the buyback plan, L&T will repurchase 33.3 million equity shares with a face value of Rs 2 each, at a maximum price of Rs 3,000 per share. This buyback represents 2.4% of the company’s paid-up capital.
Moreover, L&T’s order pipeline for the next nine months reached an impressive Rs 10 trillion, marking a significant 34% increase compared to the previous year. This outstanding growth in the order book outpaced the 14% rise observed in the previous quarter, according to analysts from CLSA.
Despite experiencing a slight decline in its core E&C (engineering & construction) margin due to legacy COVID-19 projects and higher staff costs, analysts at CLSA remain optimistic about L&T’s future prospects. They anticipate that the company’s margins will recover in the third quarter, as L&T takes actions to enhance return ratios and capital returns. As a result, L&T maintains an average “buy” rating from 36 analysts, with a median price target of Rs 2,724, according to data from Refinitiv, reflecting the overall positive sentiment in the market for the company.
Stock market experts at Prabhudas Lilladhar also share positive sentiments about L&T’s long-term potential. They believe the company is well-positioned to benefit from several factors, including strong tender prospects, improved order conversion in the domestic market, significant growth in hydrocarbon and renewable energy orders from international markets such as Saudi Arabia, and an expected uptick in private capital expenditure in the domestic market. Based on these factors, they maintain a “BUY” rating for L&T and have revised their sum-of-the-parts valuation to Rs 2,955 (previously Rs 2,615), valuing the core business at a PE of 22x FY25E, given the strong revenue visibility, prudent net working capital management, and improving operational performance of the Hyderabad Metro project.
Overall, the positive quarterly results, the significant order book growth, and the announcements of the share buyback and special dividend have generated a wave of optimism among investors. With the company’s strong fundamentals and promising growth prospects, Larsen & Toubro looks poised for continued success in the foreseeable future.