L&T stock continues to slide post Q4 on margin concerns
Weak margins posted by the infrastructure giant L&T. The last quarter of fiscal ’23 sent the stock on a downward spiral since Thursday.
On Wednesday, the company recorded a jump of 10.11 percent In its consolidated net profit for the fourth quarter at Rs. 3,986 crore as against Rs. 3,620 crore recorded in the last year period. Results were not in the lines expected, dragged down by lower operating margins. However, the reports attributed the decline in the company’s shares to its non-executive chairman, Am Nike, step down.
The stock fell 6.16 per cent in two days – more than 5 per cent on Thursday to INR 2,241.65 from Wednesday’s close of INR 2,366.75; It was in negative territory on Friday as well, touching as low as ₹2,197.85 before closing at ₹2,220.90 (nearly 1 percent down). However, the stock did not live up to the level of confidence of the brokers, as they are still optimistic about it.
excellent
YES Securities, which said the stock “missed profit margins,” but with “order book at a record high,” recommended investors “add” the stock with a target price of €2,654. “We believe L&T is well positioned to emerge stronger given its financial, technical and managerial ability to maintain and gain market share,” said a report from the brokerage firm. L&T believed ROE margins would improve on the back of the IDPL sale. Improving the operational performance of the Hyderabad Metro and Nabha Power Plant; better margin in the P&M business; and buy back shares, the report added.
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According to Ravi Singh, Vice President and Head of Research, Share India, margins saw a sudden reversal with a drop of 100 basis points from 15 per cent in Q4FY22. He added, “We can expect some corrections in the near term, but the overall outlook remains good. The long-term”.
Brokers like Jefferies, HDFC Securities, Prabhudhas Lilladher, CLSA, LKP Securities and Goldman Sachs have given a thumbs up to the stock with a “buy” rating. “Considering record order book of ₹ 4-lakh crores and order inflows of ₹ 2.3-lakh crores; exiting IR margins; improving subsidiary performance; improving net working capital levels; and capitalizing on private and public capital expenditures in the coming years, we have The stand-alone multiplier increased to 24x from 23x HDFC Securities said: “We keep buying shares with TP increasing 2.724/share (24x core March -2025 EPS).
Tender prospects
Analysts are bullish on L&T as they expect the company to benefit from the bidding process.
Amit Anwani, Research Analyst, Prabhudas Lilladher Pvt Ltd said: “We believe L&T is well positioned to benefit in the long run through strong tender prospects, better system transformation in the domestic market, significant attraction in the hydrocarbon segment from the export market and an expected rise in own capex. “.
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According to Sharkhan, the infrastructure sector is witnessing healthy bidding and awarding activity, with announcements of private sector projects also gaining momentum. “Although margins have been under pressure over the past few quarters, an improvement is expected from the second half of fiscal ’24,” she said.
bloomberg The data shows that L&T’s operating margins for the fourth quarter of the last fiscal year were at 10.25 percent, down from 12.76 percent sequentially.