L&T share surges 4% on Q1 earnings boost; what should investors do?

Larsen & Toubro (L&T) share price surged nearly 4% in the intraday trade on Wednesday, a day after the engineering and construction major reported its June quarter results. The infrastructure giant has reported robust growth in a seasonally soft quarter on the back of a strong order book, but input cost headwinds impacted margin.

For the quarter ended June 30, 2022, L&T posted a consolidated net profit of ₹1,702 crore, up 45% year-on-year (YoY) from ₹1,174 crore in the year-ago period, driven by strong execution with equally strong order inflows during the period under review. The consolidated revenue from operations jumped 22% to ₹35,853 crore in Q1FY23, as against ₹29,334 crore in the same quarter last fiscal on the back of strong growth momentum in IT and Technological services (IT &TS). The international revenue, which constitutes 37% of the total revenue, stood at ₹13,235 crore during the quarter.

In the April-June quarter of 2022, L&T registered strong order inflows worth ₹41,805 crore, which grew by 57% YoY. Orders were received across diverse segments like public spaces, metros, water management and waste water, minerals and metal, factories, data centers, defence, power transmission, and distribution and hydrocarbon offshore sectors. International orders came in at ₹17,842 crore, which contributes 43% to order inflows.

Boosted by strong Q1 results, L&T share price gained as much as 3.9% to hit an intraday high of ₹1,819, against the previous closing price of ₹1,750.45 on the BSE. The infra heavyweight opened higher at ₹1,758, while it touched an intraday low of ₹1,750 during the session so far. In comparision, the BSE benchmark Sensex was trading 423 points higher at 55,691 levels at the time of reporting.

L&T shares currently trade 13% lower than its 52-week high of ₹2,078.20 touched on January 18, 2022. It touched a 52-week low of ₹1,456.80 on June 20, 2022. The market capitalisation of the Sensex heavyweight stood at ₹2.53 lakh crore.

The stock has given 12% returns to its shareholders in the past year, while it has fallen more than 5% in the current calendar year (year-to-date basis). However, the stock has regained momentum and rose 17% in a month and 3.5% in the past one week.

Post Q1 result, global brokerage Edelweiss Securities has retained ‘Buy’ call on the stock with a revised target price of ₹2,370, from earlier estimated price of ₹2,274. As per the ratings firm, L&T’s earnings guidance for the current fiscal as well as pipeline coupled with a confident core margin commentary augurs well for the stock.

Emkay has recommended “Buy” call on the infra stock and 12-month target price of ₹1,960.

Another brokerage Prabhudas Lilladher has also given a “Buy” call on Larsen & Toubro, with a target price of ₹2,030 and a time frame of one year. The brokerage opines the company is poised to benefit from overall diversified tender prospects with better order conversion in the domestic market, significant traction in capex from oil exporting countries, and expected uptick in private capex.