Consolidated revenue from operations stood at Rs 35,596.4 crore for the quarter ended December 2020 down by 1.8 percent year-on-year.
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Larsen and Toubro (L&T) share price rose over a percent in early trade on January 27 after the company announced its December quarter earnings.
On January 25, the company reported a 4.9 percent year-on-year growth in Q3 FY21 consolidated profit at Rs 2,467 crore on the back of highest-ever orders in a quarter.
Consolidated revenue from operations stood at Rs 35,596.4 crore for the quarter ended December 2020 down by 1.8 percent year-on-year.
Also Read – L&T Q3 profit rises 5% to Rs 2,467 crore, bags highest ever orders in a quarter
“A majority of our consolidated debt of 1.7 trillion is with L&T Finance (around Rs 90,000 crore). After taking that debt out, the actual debt on L&T’s books is Rs 70,000 crore. Within this, our developmental projects-L&T Infrastructure Development Projects (IDPL) and Hyderabad Metro have a Rs 35,000-crore debt,” said SN Subrahmanyan, MD & CEO of L&T in an interview with Business Standard.
“We are planning to sell our entire stake in L&T IDPL and move out of the road construction business. We have sold a large stake in IDPL. A large part of our debt is also due to the Hyderabad Metro project. The project was commissioned before the pandemic. Once we sell these projects, we are targeting at becoming debt-free company,” he added further.
Below is a summary of what some brokerages are saying about the stock and the company after the Q3 numbers:
Sharekhan
L&T’s strong order backlog along with its presence across verticals and geographies in its core E&C business provides healthy revenue visibility. We expect L&T to benefit from strong traction in its core E&C business led by government-led infrastructure projects and revival in private capex. L&T order inflow has remained strong during 9MFY21, which along with strong order prospects pipeline is expected to maintain healthy order inflow momentum for the balance of FY2021 and the whole of FY2022.
The company’s current valuation at 20x/17x its P/E on FY2022E/FY2023E earnings provides limited downside risk. Hence, we continue to maintain our buy rating on the stock with an unchanged SOTP-based price target of Rs 1,550.
Dolat Capital
As guided, H2 is seeing an increasing ramp-up in execution as project sites are back to normal, with further anticipated improvement in Q4. The current ordering pipeline also remains strong at Rs 2.65 trillion in the fourth quarter, with Rs 2.2 trillion of domestic order pipeline. However, they are still cautious and have refrained from guiding for FY21, despite only one quarter left for the year.
The company is the preferred play for recovery in the capex cycle. Its size, diversity and balance sheet are key competitive advantages. We retain estimates and maintain buy with a SOTP based target price of Rs 1680, as we increase multiples for the core business on improving order inflows and also update the change in subsidiary valuations.
Prabhudas Lilladher
L&T reported a healthy set of numbers led by a pick-up in execution in its core infra segment, owing to improved workforce availability and supply chain issues normalizing.
With labour availability at full strength in 3Q, we expect sustained execution pick-up and improved productivity in 2HFY21. Also, timely payments from Central/State governments provide comfort on the working capital front. We believe that L&T is well-placed to emerge stronger given its financial, technical and managerial capability to sustain and gain market share.
At CMP, the stock is currently trading at 30.3x/20.6x/18.4x FY21E/22E/23E. We roll over to FY23 estimates and maintain buy with revised SOTP based target price of Rs 1,526 (earlier Rs 1,284). Target price is revised upwards mainly due to the recent rise in market capitalisation of its holdings companies.
ICICI direct:
L&T reported strong order inflows while execution is seeing traction amid higher workforce mobilisation and supply chain normalisation that could improve over the next few months. Also, improved collections would further help improve the working capital situation while cash proceeds from E&A have provided much-needed liquidity comfort and ability to repay debt, further strengthening the balance sheet.
We expect it to deliver standalone revenue CAGR of 13.7%, EBITDA CAGR of 13.4% and PAT CAGR of 14.6% in FY21-23E. We value L&T on SoTP (base business at 20x FY23E EPS of Rs 49.5) basis with a target price of Rs 1640 (earlier target price of Rs 1045). We change our rating from hold to buy.
Motilal Oswal
L&T has rightly prioritised balance sheet strength over growth during the current COVID-19 crisis. On the back of E&A sale, the current cash and cash equivalents stand over Rs 450 billion, with negligible net gearing in the core business. The all-time high order book (3QFY21: +8%; FY21E: +16%), with OB-to-revenue ratio of 3.7x, provides strong revenue visibility.
We raise our FY21E EPS by 9% on account of the surprise in headline numbers but keep our FY22E/FY23E EPS largely unchanged. We maintain buy with an unchanged target price of Rs 1,625 per share.
CLSA
The research house has kept buy rating with a target at Rs 1,620 per share. The valuation is inexpensive at current levels and it is on the cusp of the next capex cycle upturn. The doubling order inflow, rebound in backlog & rise in cash flow operations were the highlights of Q3 result, reported CNBC-TV18.
Credit Suisse
Credit Suisse has maintained an outperform rating with a target at Rs 1,700 per share. The results were largely in-line with expectations. The EPC execution was lower on COVID-19 restrictions.
The EBIT margin in EPC was in-line with stronger margin in hydrocarbons & weaker in infra. It revises earnings by +9%/1%/3% for FY21/22/23E, driven by IT subsidiaries, reported CNBC-TV18.
UBS
UBS has maintained a buy rating with a target of Rs 1,575 per share. The book-to-bill ratio was at a 20-quarter high, while valuations are still undemanding.
The company is trading at a 12% discount to its 10-year average one-year forward PE. The market is not pricing in its market share gains. However, the key risk to our call is a scenario of a protracted trajectory of economic recovery, reported CNBC-TV18.
Goldman Sachs
Goldman Sachs has kept the buy rating and raised the target price to Rs 1,650 from Rs 1,450. The Q3 results were a strong performance in a challenging macro environment and Q3 earnings indicate sequential improvement in performance hereon, reported CNBC-TV18.
Citi
The research firm has kept the buy call with a target of Rs 1,657 per share. The quality & competitive advantage shine through, while order inflows were driven by large orders from HSR & refineries.
The Q3 core E&C revenue expectedly muted, while margin held up and Q3 prospects appear healthy with balance sheet remains strong, reported CNBC-TV18.
Morgan Stanley
Morgan Stanley remained overweight with a target of Rs 1,512. The core margin was up 80 bps, helped by profit on the sale of the commercial tower. It’s continued to focus on strong cash generation and ended Q3 with record order inflows & order book, reported CNBC-TV18.
At 09:16 hrs, Larsen & Toubro was quoting at Rs 1,380.50, up Rs 19.20, or 1.41 percent on the BSE.
The share touched its 52-week high Rs 1,395.75 and 52-week low Rs 661.05 on 25 January, 2021 and 25 March, 2020, respectively.
Currently, it is trading 1.09 percent below its 52-week high and 108.83 percent above its 52-week low.
