NEW DELHI: Shares of Larsen - Toubro (L-T) climbed 3 per cent in Thursdays trade after the company reported strong order flows for the December quarter and maintained its order inflow growth for FY20 at 10-12 per cent.Analysts were largely expecting the engineering and construction major to cut inflow guidance amid a tough macroeconomic environment.The inflow guidance implies revenue of Rs 50,000-54,000 crore in the March quarter, which would be 20-30 per cent higher compared with the same quarter last year.For the quarter gone by, the company won new orders worth Rs 41,579 crore, with international orders accounting for 43 per cent for the total orders at Rs 17,901 crore.At 9.30 am, the scrip was trading 3 per cent higher at Rs 1,333 on BSE.The company on Wednesday reported a 15.2 per cent year-on-year rise in consolidated profit at Rs 2,352 crore for the December quarter.
The company had reported Rs 2,041.62 crore profit in the same quarter last year.Nomura India said that the companys core revenue weakened on execution headwinds.
Order inflows remained robust while stable working capital levels led to strong cash generation, it said, adding that the improvement in core Ebitda margin was a key positive in the third quarter.Revenue for the company rose 6 per cent to Rs 36,243 crore for the quarter.
International revenue stood at Rs 12,871 crore and accounted for 36 per cent of the total sales.At our target price of Rs 1,715, L-T trades at 14.7 times FY21 EPS, which we think is justified given its diversified business profile; its FY20-21F earnings include a substantial portion of loss-making businesses such as Hyderabad Metro, Nomura said.CLSA said that the order flows for the December quarter were surprising, but the execution was weak.Motilal Oswal said the bleak operating performance is largely attributable to the weakness in core E-C segment, where revenue declined 3 per cent YoY to Rs 25,400 crore, its first de-growth in 23 quarters.We note that the worsening of working capital is not on account of the receivables but on account of payables, as L-T has supported its vendors in the time of liquidity crunch.
We believe that as the situation improves, L-T would be able to improve its working capital cycle again.
At current market price, the stock trades attractively at FY21/22E P/E of 16.8 times/14.1 times (adjusted for valuation of non-core businesses).
We maintain Buy with a target price of Rs 1,680, Motilal said.