L&T share price has surged 63 per cent over the last year, significantly outperforming the benchmark Sensex which has also gained impressively by 26 per cent. Moreover, in the shorter term, L&T’s shares have continued to exhibit strength, with a noteworthy gain of over 7 per cent in the last month alone, while the Sensex has shown a more modest uptick of approximately 1 per cent.
Despite sharp gains over the last year, experts are positive on the stock for the long term. Recently brokerage firm CLSA maintained a ‘buy’ call on the stock with a target price of ₹4,260.
Mint gathered opinions from various experts to determine the recommended course of action regarding the stock. Here are their views:
Fundamental views
The brokerage firm has maintained a buy call on the stock with a target price of ₹4,200 as it believes that the recent concerns related to L&T’s performance are “transient”.
“The ramp-up of domestic inflows after elections, the completion of low-margin legacy projects in the next couple of quarters, the constant reduction in working capital and the resultant RoCE (return on capital employed) improvement, and low working capital in international projects despite being fixed-price projects are the positive factors that will drive growth ahead,” said Motilal Oswal.
Also Read: Stocks to buy: These 5 stocks could jump up to 40% in 1-2 years, says Pankaj Pandey of ICICI Direct
Arafat Saiyed, Vice President, Incred Capital
Saiyed is bullish about the stock as he pointed out that the stock will gain on India’s growth story.
He said India’s economy is expected to grow by 7 per cent and witness an uptick in spending by the government, improved demand, and healthy balance sheets of banks, PLI schemes, etc. The company will continue to tap opportunities in India and overseas and focus on the profitable execution of its large order book.
For FY24F, management expects order inflow growth of over 20 per cent compared to its earlier guidance of 12 per cent. Moreover, revenue is expected to grow in the high teens while the previous guidance was nearly 15 per cent, Saiyed pointed out.
Projects and manufacturing or P&M business margins have been on the expected lines while there may be some sort of margin pressure. L&T has a strong order pipeline worth about ₹6.27 lakh crore, up 29 per cent year-on-year (YoY), mainly led by a sharp improvement in the hydrocarbon business, especially in the international market.
The order inflow and execution momentum is likely to continue coupled with divestments, deleveraging and the government’s focus on infrastructure spending, which bode well for L&T.
“We have an ‘add’ rating on the stock with a SOTP-based target price of ₹4,016,” said Saiyed.
Technical views
Milan Vaishnav, CMT, MSTA, Founder and Technical Analyst of Gemstone Equity Research and ChartWizard FZE
Vaishnav observed that L&T has formed a minor double top in the ₹3,700-3,730 zone and is currently consolidating in a narrow range. However, the RSI has shown a mildly bearish divergence against the price.
“Traders can consider booking partial or full profits at current levels and can re-enter above ₹3,730 level,” said Vaishnav.
“Investors who are holding this stock can stay invested. The stock has not reversed its trend therefore while staying invested, they can trail their stop loss higher to ₹3,500,” Vaishnav said.
Pravesh Gour, Senior Technical Analyst at Swastika Investmart
Gour pointed out that in the longer timeframe, the stock is in the formation of cup and handle formation. The structure of the counter looks lucrative, as it is trading above all its important moving averages.
MACD (moving average convergence divergence) supports the current strength, whereas the momentum indicator RSI (relative strength index) is also positively poised.
“On the long-term view, ₹3,750 is the immediate hurdle on the upside; above this, we can expect a move towards ₹4,200+. On the downside, ₹3,500 will be the support level, while below this, ₹3,300 is a strong demand zone during any correction,” said Gour.
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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 18 Mar 2024, 09:09 AM IST