The Rs 10,000 crore buyback program, which equates to approximately 2.4% of outstanding shares at a maximum price of Rs 3,000 per share, improves L&T’s confidence. It is still Citi’s top pick for the medium term.
The market capitalization of engineering giant Larsen & Toubro reached Rs 4 lakh crore on September 7 due to the spike in share price following the company’s acquisition of a contract for Saudi Aramco’s Jafurah unconventional gas development project, which is probably worth close to $4 billion.
Reliance Industries Ltd., TCS, HDFC Bank, Infosys, ICICI Bank, HUL, ITC, LIC, SBI, Bharti Airtel, Bajaj Finance, Adani Energy Solutions, Adani Green Energy, Adani Enterprises, Kotak Mahindra Bank, and Adani Total Gas are other companies that have reached this milestone in terms of market capitalization. On September 7, the stock reached a new record high of Rs 2854.95 a share.
Numerous brokerages have kept their buy recommendations while raising their stock price targets. In addition to CLSA maintaining its buy rating on the stock and raising its target price to Rs 3,240, Citi has lifted its target price from Rs 2,889.48 to Rs 3,175 while Morgan Stanley has maintained its overweight rating and set its target price at Rs 2,935 per share.
According to news reports, as part of the Jafurah unconventional gas production project, L&T has been charged with setting up a gas processing facility and its primary process units and will build gas compression units.
This order would represent 17 percent of core order inflows and 13 percent of Morgan Stanley’s yearly guidance (F24e growth of 10 to 12 percent). For L&T, it anticipates possible Upside Risks. Including increased public spending, declining prices for steel and other materials, and faster economic development, which led to higher-than-anticipated private capital expenditures.
Few analysts believe that the Middle East hydrocarbon industry represents L&T’s main prospect for growth in FY24, allaying fears about a potential slowdown in government orders prior to the impending elections in the fourth quarter of FY24.
“We anticipate a re-rate in the stock by the time orders are placed and EPS becomes visible. Therefore, we increase our E&C multiple to 25x from 24x, CLSA stated in its most recent note.
L&T’s hydrocarbon potential list reached a total value of Rs 3.47 lakh crore in the first quarter, a significant rise from Rs 2.44 lakh crore in the fourth quarter of FY23 and Rs 1.02 lakh crore in the first quarter of FY23. This prospect list is largely from the Middle East, accounting for about 70% of the total.
Following the first-quarter results, brokerage company Citi noted that L&T increased its FY24E growth potential, principally due to an improvement in hydrocarbon prospects. With a parent-level surplus of Rs 250 billion, significantly increased working capital, and a persistent upward trajectory in consolidated Return on Equity (RoE), L&T’s financial health has also improved.
Its confidence in L&T is increased by the announced buyback of up to Rs 10,000 crore, or roughly 2.4 percent of outstanding shares, at a maximum price of Rs 3,000 per share. L&T remains our top pick from a medium-term standpoint, according to Citi’s most recent note.
