Larsen & Toubro (L&T), one of India’s leading conglomerates, is gaining momentum in the stock market. Prabhudas Lilladher, a reputable brokerage firm, recently issued a “buy” rating for L&T, setting a target price of ₹4,088 in its research report dated October 31, 2024. With a strong presence in multiple sectors, L&T is positioned to benefit from ongoing private and public investments, and this optimistic outlook makes it a compelling pick for investors.
Why Larsen & Toubro is a Strong Buy Based Various Analyst Report
L&T’s robust fundamentals and strategic initiatives are driving its stock upward. Here are some positive aspects of the company’s performance:
- Strong Momentum: L&T’s share price is trending above its short, medium, and long-term moving averages, indicating solid upward momentum.
- Effective Capital Use: The company’s Return on Capital Employed (RoCE) has shown steady improvement over the last two years, highlighting its effective capital utilization.
- Shareholder Value: Return on Equity (ROE) has been increasing for two consecutive years, reflecting L&T’s efficient use of shareholders’ funds.
- Efficient Asset Management: Return on Assets (ROA) has also improved in the past two years, suggesting better asset management.
- Consistent Profit Growth: Quarterly profits are growing, along with improving profit margins, indicating efficient operations.
- Annual Profit Growth: L&T has seen a steady increase in annual net profits over the last two years.
- Improving Book Value: The company’s book value per share has also improved over the last two years.
- Zero Promoter Pledge: No promoter pledges provide stability and confidence to investors.
- Institutional Confidence: Foreign Institutional Investors (FIIs) and domestic institutions have been steadily increasing their holdings in L&T.
L&T’s Strategic Initiatives
Although public sector capital expenditure has slightly moderated, substantial private investments are expected to drive strong domestic order intake in the second half of FY25. L&T has also re-entered the thermal power sector, bidding for significant orders, including a ~4GW order from NTPC. Additionally, L&T is expanding into new verticals such as:
- Renewable Energy: Established a dedicated business for green energy solutions.
- Electrolyzers: Plans to ramp up its electrolyzer manufacturing capacity to 1GW.
- Data Centers: Commissioned a 14MW data center and has plans for further expansion.
- Semiconductors: Recently acquired a power semiconductor startup and opened a development center.
With a current P/E ratio of 29.9x for FY25, the stock’s valuation is attractive given L&T’s growth potential.
