Prabhudas Lilladher’s research report on Larsen and Toubro
L&T has received a letter of intent worth about $3.9 billion from Saudi Aramco to expand phase II of the Jafurah unconventional gas production project, which could meet about 13% of the guidance. FY24 order guidance. Company booked orders worth Rs 655.2 billion in Q1FY24 We believe L&T will easily exceed FY24 guidance. Orders Line Order inflows will grow at 10-12% in FY24 (~Rs 2.3 trillion in FY23), driven by significant domestic and international orders. The company revised its Q1FY24 tender outlook to Rs 10.07 trillion for 9MFY24 from Rs 9.73 trillion guided for 12MFY24. The outlook revision was mainly in the hydrocarbon sector (Rs 3,470 billion guided in Q1FY24 vs Rs 2,440 billion in Q4FY23), mainly from the Middle East market. We believe L&T is well positioned to benefit over the long term due to 1) strong bidding outlook, 2) better order conversion in the domestic market, 3) significant traction in the hydrocarbon sector and 4) renewable energy orders in international markets such as Saudi Arabia and expected increase. in national private investment.
Opinion
We revise our estimates for FY24/25E by 1.7%/3.7%, after taking into account healthy growth prospects for the hydrocarbon sector. The stock is currently trading at a PE of 32.9x/27.1x FY24/25E. Maintain ‘Buy’ rating on the stock with revised SoTP-based TP of Rs 3,302 (previously Rs 2,955), valuing the core business at a PE of 25x FY25E ( previously it was 22 times), thanks to the recent order achieved significant contributions contributing to Hyderabad Metro’s high revenue visibility and improved performance.
