Broker call: Larsen & Toubro (buy)
Larsen & Toubro (L&T) is a proxy game of infra Indian history with strong expertise and track record of delivering high value orders. We expect the momentum to continue over the next two years, driven by multiple high-value orders, including National Infrastructure Pipeline (NIP), Bharatmala, Sagarmala, High Speed Rail and subway, etc.
L&T is well positioned to benefit from several large projects, as it meets all the basic requirements – balance sheet size, strong track record, technical expertise and sufficient liquidity to bid on such projects. L&T is looking for ₹8.5 lakh crore opportunities in FY23.
Cash expenditure in the Hyderabad metro project and rising input costs are seen as major short-term surpluses.
For FY23, management has guided 12-15% growth in order intake and group revenue. Project and manufacturing margins are expected to remain around 9.5%. However, given the volatility of the EPC segment, management opted for an NWC-to-sales ratio of 20-22% in FY23.
Order intake was up 46% YoY to ₹73,940 crore in Q4-FY22, while FY22 order intake was up 10% to ₹1.93 crore. Total order backlog as of FY22 stood at ₹3.56 lakh crore (+9.2%). The PLI program and “Atmanirbhar Bharat” will give new impetus to infrastructure development and domestic manufacturing.
July 01, 2022