Engineering major L&T shares soared by 4.4% to an all-time high of 2,673.85 per share, becoming the top gainer on Nifty 50. This surge followed the company’s strong quarterly results, which were bolstered by a robust order book, leading to announcements of a share buyback and a special dividend.
The company reported an unexpected 46.5% surge in quarterly profit, a development that was warmly received by investors. Additionally, the board of directors approved a share buyback worth Rs 10,000 crore and announced a special dividend of Rs 6 per share. The company said it would buy back 33.3 million equity shares of a face value of Rs 2 each, at a maximum price of Rs 3,000 per equity share. This represents 2.4% of its paid- up capital.
Although the company experienced a decline in its core E&C (engineering & construction) margin due to legacy COVID projects and higher staff costs, CLSA expressed optimism, expecting L&T’s margins to recover in the third quarter as they take actions to improve return ratios and capital returns. With an average “buy” rating from 36 analysts covering L&T, and a media price target of Rs 2,724 according to Refinitiv data, market sentiment for the company remains positive.
Stock Call
Prabhudas Lilladhar said L&T is well-placed to benefit in the long run with 1) strong tender prospects, 2) better order conversion in the domestic market, 3) significant traction in hydrocarbon and 4) renewable energy orders from international markets like Saudi Arabia and expected uptick in private capex in domestic market. “The stock is currently trading at PE of 29.1x/24.4x FY24/25E. Maintain ‘BUY’ rating with revised SoTP of Rs 2,955 (Rs 2,615 earlier), valuing core business at PE of 22x FY25E, (21x earlier), given strong revenue visibility, prudent NWC management and improving Hyderabad Metro operational performance,” added the report.