L&T Shares Sink 5% Post Weak Q4 Results; What Should Investors Do Now?

Shares of Larsen & Toubro (L&T) tanked 5 per cent within the opening commerce on Thursday reacting to its January-March quarter efficiency. It was buying and selling at Rs 2,292.70 on the NSE and was down by Rs 71.75 from Wednesday’s closing worth.

On Wednesday, L&T reported a ten per cent year-on-year (YoY) development in consolidated internet revenue for the March quarter at Rs 3,987 crore.

Consolidated income from operations rose 10.4 per cent YoY to Rs 58,335.15 crore, however this determine too, was decrease than the estimated Rs 59,256 crore. For FY23, the topline rose 17 per cent on-year to Rs 1.83 lakh crore, and the bottomline grew 21 per cent to Rs 10,471 crore.

The board has really useful a remaining dividend of Rs 24 a share for FY23. The quarterly outcomes had been introduced after market hours.

The inventory of the nation’s largest infrastructure firm had hit a report excessive of Rs 2,416 on May 2, 2023. However, regardless of the inventory’s 4 per cent decline from its all-time excessive degree, L&T has outperformed the market by surging 9 per cent so far within the calendar 12 months 2023. In comparability, the S&P BSE Sensex is up 1.5 per cent throughout the identical interval. In the previous one 12 months, L&T has rallied 45 per cent, as towards practically 15 per cent achieve within the benchmark index.

Should you Invest?

“L&T stays one of the simplest ways to play the capex restoration theme in India given its sturdy execution functionality, presence throughout numerous sectors and geographies, which makes its much less weak throughout down cycles. Focus on monetisation of non-core belongings, enhancing RoEs and decreasing debt makes its a lovely portfolio guess to trip the infrastructure and manufacturing cycle revival theme,” the brokerage firm ICICI Securities said in a note.

L&T reported decent set of quarterly performance with consolidated revenue growth, while margins contracted 74bps YoY due to cost pressure in certain EPC project. Net working capital (NWC) to sales improved to 16.1 per cent in FY23 vs 19.7 per cent in FY22, owing to robust operational cash flows supported by smart execution and customer’s advances, said analysts at Prabhudas Lilladher.

CLSA highlighted that the company’s Q4 beat three out of four guidance targets and the management guided for an even stronger FY24 on a higher base. The brokerage house has a ‘buy’ rating on the stock with a target price of Rs 2,790.

However, it pointed out that the key surprise was mega defence orders which L&T did not announce. Moreover, core a decline in engineering and construction margins was also a disappointment.

Even Goldman Sachs said a weak margin remains an area of disappointment. A weak margin offset an otherwise strong outlook, it added. Core EBITDA margin came in at 8.7 percent, flat QoQ and 80 bps lower YoY.

Goldman Sachs has a ‘buy’ ranking on the EPC main’s shares with a goal worth of Rs 2,540.

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