Hot Defence Stock: Bolo Jai Shree Ram In Maker Of Ayodhya Temple; L&T Share Has Potential For 23% Upside Ahead

Larsen & Toubro, is a multibagger defence stock. L&T gained a lot of attention since the start of 2024 due to its buyback, the launch of Ayodhya's Ram Mandir and order deals. That's right, Larsen is the focal point in the development the auspicious Ram Mandir which is expected to drive Ayodhya and Uttar Pradesh's economy. At latest, L&T's stock is in focus after its Q3 results. This special stock which has been an infra giant is also likely get a boost from the policies and measures announced in interim budget.

That being said, Prabhudas Lilladher and LKP Securities have recommended buying L&T stock. There is a potential for nearly 23% upside in L&T in the near term.

On February 14th, L&T share price traded at Rs 3,303.55 apiece, down marginally with a market cap of Rs 4,54,115.78 crore on BSE, at the time of writing. The stock ranged from Rs 3,330.75 to Rs 3,290.55 apiece.

In past six months, L&T shares have gained by 23%, while in a year, the stock is up by 52%. While in 5 years, the stock gives massive 165% returns as of now.

In Q3FY24, L&T achieved Consolidated Revenues of Rs 55,128 crore, recording a y-o-y growth of 19%, aided by ramp up in execution of the strong order book in the Projects and Manufacturing portfolio. International revenues during the quarter at Rs 24,300 crore constituted 44% of the total revenue. PAT stood at Rs 2,947 crore, registering growth of 15% compared to the corresponding quarter of the previous year.

By the end of December 2023, the company achieved orders worth Rs 75,990 crore at the group level, registering a robust growth of 25% on a y-o-y basis. During the quarter, orders were received across various businesses like Offshore vertical of Hydrocarbon, Solar EPC & Power Transmission, Water Utilities, Buildings & Factories and Minerals & Metals sectors. International orders at Rs 50,562 crore during the quarter comprised 67% of the total order inflow.

In its latest research note, Prabhudas Lilladher said, "We revise our FY24/25/26E EPS estimates by -7.6%/+5.0%/+8.1% factoring in the impact of legacy jobs on FY24 profitability and robust order book & tender
prospects FY25 onwards. Larsen & Toubro (LT) reported consolidated revenue growth of 18.8% YoY, while the EBITDA margin contracted by 49bps YoY due to job mix and execution of legacy projects. NWC to sales improved to 16.6% (vs 19.0% in 9MFY23) owing to better collections, with FY24 guidance revised to 16.6% +/- 30bps (vs 16-18%)."

Further, PL highlighted that the management has revised its order inflow/revenue growth guidance for FY24 to 20%+/high teens respectively (vs 12%/15%) given strong order inflows YTD and robust order prospects. Opportunities lie in a healthy domestic infrastructure pipeline and growing GCC capex on hydrocarbon & infrastructure (led by Saudi Vision 2030). Management also revised its core margin guidance to 8.25-8.5% (from 8.5%-9%), factoring in the execution of low-margin legacy jobs and newer projects still in the ramp-up stage which may not cross the margin recognition threshold.

Also, PL believes L&T is well-placed to benefit in the long run with 1) strong tender prospects, 2) significant traction in hydrocarbon, 3) renewable energy orders from international markets like Saudi Arabia, and 4) an expected uptick in domestic private capex. The stock is currently trading at a P/E of 29.1x/24.3x FY25/26E.

Hence, PL's note said, "We roll forward to Dec-25 and maintain a 'Buy' rating with a revised TP of Rs4,071 (Rs3,437 earlier), valuing the core business at a P/E of 26x Dec25E (24x Sep-25E earlier) owing to strong outlook on the order book and margins."

Meanwhile, analysts at LKP Securities also said in their research report that "Given record OB with strong order pipeline, revival in private capex, healthy outlook ahead we remain positive on L&T earnings growth prospects. We have tweaked the estimates factoring strong execution and order inflow and marginally lowered margins given
some delay in core margins recovery. We roll over our estimates to FY26 and maintain 'BUY' with a revised SOTP-based TP of ₹3,865."

Larsen & Toubro is a $23 billion Indian multinational engaged in EPC Projects, Hi-Tech Manufacturing and Services. It operates in over 50 countries worldwide. A strong, customer-focused approach and the constant quest for top-class quality have enabled L&T to attain and sustain leadership in its major lines of business for eight decades.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.