CLSA Maintains ‘Buy’ on L&T with 10% Upside Potential

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CLSA, a global financial services firm, has maintained its “buy” recommendation on Larsen & Toubro (L&T) with a target price of Rs 3,240. This implies an upside potential of 10% from the stock’s current price of Rs 2,936.85.

The brokerage firm is optimistic about L&T’s prospects due to the following factors:

  • Rising project inflow: L&T has seen a strong rise in project inflow in recent months, driven by the government’s focus on infrastructure development.
  • Highest ever backlog: L&T has the highest ever backlog of Rs 3.8 trillion, which provides a good visibility of revenue and earnings in the coming quarters.
  • Improving execution: L&T’s execution has improved in recent quarters, which is reflected in its rising margins.
  • Margin expansion in the second half of FY24: CLSA expects L&T’s margins to expand in the second half of FY24, driven by higher realizations and lower costs.
  • Buyback to drive up RoE: L&T’s buyback program will drive up its return on equity (RoE), which is currently below its target of 15%.
  • Focus on green business: L&T is focused on green business and is on track to achieve its net zero target by 2050.

Overall, CLSA believes that L&T is a good investment for the long term and has the potential to deliver strong returns to shareholders.

In addition to the above, CLSA also highlighted the following risks to L&T’s growth:

  • Delays in project execution: Any delays in project execution could hurt L&T’s margins and earnings.
  • Increase in input costs: Any increase in input costs, such as steel and cement, could also hurt L&T’s margins.
  • Slowdown in the global economy: A slowdown in the global economy could impact L&T’s export business.

Despite these risks, CLSA believes that L&T is a good investment for the long term and has the potential to deliver strong returns to shareholders.


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