L&T share price falls 2% post October-December quarter results; should you buy or sell?

Larsen and Toubro (L&T) share price fell as much as 2 per cent to Rs 1,334 apiece on BSE today, despite a 5 per cent on-year increase in net profit to Rs 2,467 crore in October-December quarter. However, revenues during the period were slightly lower at Rs 35,596 crore, as Covid-19 restrictions continued to have an impact on project site execution and Hyderabad metro operations. So far in January, Larsen & Toubro shares have gained 3 per cent. At least three research and brokerage firms have recommended to ‘buy’ L&T shares post third quarter results, with up to 19 per cent upside. The company reported its highest ever fresh order intake in a quarter, which surged 76 per cent on-year to Rs 73,233 crore. While its order book stood at a historic high of Rs 3.13 lakh crore during the quarter under review.

Analysts at Anand Rathi Financial Services have retained ‘buy’ rating with a target price of Rs 1,616 apiece, on the back of robust order backlog (Rs.3.3trn), sturdy balance sheet and no near competitor. The analysts expect a further pick-up in execution with labour availability and no supply-chain related issues.

It will take Larsen & Toubro shares to jump nearly 16 per cent from the previous close to touch the target price of Rs 1,575 apiece pegged by JM Financial Institutional Securities Ltd. The brokerage firm has raised its target price by 3.6 per cent from Rs 1,520, earlier. As infrastructure margins are currently stable, the brokerage firm expects L&T to improve in future on operating leverage from higher revenues. Besides, L&T remained net cash positive at the consolidated level, even as it repaid debt of Rs 9,000 crore in 9M FY21 of the Rs 12,000 debt taken in 1Q FY21.

Those at Yes Securities, see a 16 per cent rally in L&T share price, with a price target at Rs 1,584 apiece. According to the brokerage firm, core business revenue ramp up, infra margin recovery, prudent capital allocation and improving return ratios over FY21‐23E are key stock triggers. It expects L&T’s execution to gain traction in next few quarters on the back of strong order backlog of Rs 3.3 trillion (3.5x TTM Core business sales).