The brokerage firm noted that L&T’s consolidated revenues for the September quarter grew 23% year-on-year (yoy) to Rs.4,27,600. Profits were made due to increased execution speed. Still, the EBITDA margin remained stable with adjusted PAT growth of 27.4% year over year.
The company’s new orders for the quarter also rose 23.2% yoy to Rs 51,900 crore, led by an increase in domestic orders during the quarter. Order book (OB) is doing well at Rs 370,000 crore (2.2x TTM earnings) which includes exports OB up 28%, the brokerage firm noted.
“Management maintained its revenue and order growth guidance of 12-15% and NWC to revenue of ~20%. While it took a cautious stance on the 9.5% EBITDA margin guidance for FY23,” the brokerage firm said.
The brokerage firm believes the engineering, design and construction company is well positioned to benefit from an overall diversified bidding outlook. In addition, the company’s position remains strong given:
Better order conversion in domestic market,
Increasing traction in capital spending from oil exporting countries, mainly in the hydrocarbon segment
increase in private investment.
Given a healthy backlog, bidding outlook, diversification into new business (hydrogen, green EPC), improvement in Hyderabad Metro operational performance and continued execution momentum, the brokerage expects L&T to report revenue and a PAT CAGR of 10.2% and 18.2%, respectively will be FY22 to FY25. The stock is currently trading at P/E of 26.7x/23.1x/19.8x FY23/24/25E.
The brokerage firm has therefore rolled over its meter price target to FY25E EPS with a revised price target of Rs 2,384 (Rs 2030 earlier).
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