Jefferies said the third quarter has beaten expectations on order flow & EBITDA and the biggest positive is the 24 percent YoY consolidated engineering & construction (E&C) revenue growth.
Larsen & Toubro shares gained 4 percent in the morning on January 28 as brokerage houses remained bullish on the stock. They expect the stock to return 19-50 percent after December quarter earnings.
The stock was quoting at Rs 1,318.40, up Rs 32.85, or 2.56 percent on the BSE, at 0957 hours IST.
All brokerages said numbers for the quarter ended December 2018 were strong due to execution and had beaten expectations on order inflow as well as operational performance
The engineering and construction major reported a whopping 37 percent on year growth in Q3 profit at Rs 2,042 crore and revenue grew 24.2 percent to Rs 35,708.9 crore on strong execution in project businesses.
"Riding on strong execution in project businesses coupled with noteworthy performance in service businesses, the company registered a strong revenue growth of 24 percent YoY," the engineering and construction major said.
L&T secured orders worth Rs 42,233 crore at group level for the quarter ended December 2018, down 12 percent compared to Rs 48,130 crore reported in same period last year but remained steady against Rs 42,000 crore in September quarter. The company has retained its FY19 guidance for order inflow growth at 10-12 percent.
Operational numbers, too, were strong as consolidated EBITDA (earnings before interest, tax, depreciation and amortisation) increased 27.2 percent year-on-year to Rs 3,997 crore and margin expanded to 11.2 percent against 10.9 percent in year-ago.
Here is what all brokerages say about the results:
Jefferies: Buy | Target: Rs 1,925 | Return: 50 percent
The third quarter has beaten expectations on order flow and EBITDA and the biggest positive is the 24 percent YoY consolidated engineering and construction (E&C) revenue growth.
The prolonged delay in domestic capex recovery is the key risk to the stock.
CLSA: Buy | Target: Rs 1,730 | Return: 35 percent
The execution pickup without balance sheet sacrifice was commendable and we expect a further fall in working capital on recoveries at the Nabha IPP.
CLSA has a buy call on the stock with a target price at Rs 1,730 apiece.
IDFC Securities: Outperform | Target: Rs 1,527 | Return: 19 percent
The strong third quarter performance was dented only by weak infrastructure segment. Improved domestic execution and domestic inflows were key positives during the quarter.
We expect buoyant 15/15.2 percent revenue/EPS CAGR for the company over FY18-21.
Kotak Institutional Equities: Buy | Target: Rs 1,530 | Return: 19 percent
We increased order inflow and topline estimates in core E&C segment given strong performance but cut margin by 60-80 bps given segmental margin weakness seen in nine-month of FY19.
Credit Suisse: Outperform | Target: Rs 1,700 | Return: 32 percent
The third quarter results were strong on execution and overall seemed to exceed expectations. However, results reflected weak EPC margins, particularly in the infra segment.
The brokerage house has made marginal EPS revisions and reiterated outperform rating on the stock with a target price at Rs 1,700 apiece.
Morgan Stanley: Overweight | Target: Rs 1,786 | Return: 40 percent
L&T's domestic & international revenues during the quarter grew 30 percent and 14 percent respectively. The company reported Q3 revenue/EBITDA/adjusted PAT growth 8/9/8 percent was above estimates.
Hence, we remained overweight on the stock with a price target at Rs 1,786.
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