The recent decline in the share price of Larsen & Toubro (L&T) by almost 2% during morning trade on the Bombay Stock Exchange (BSE) on Friday suggests the possibility of extending its consecutive period of losses. This drop is attributed to the prevailing weak market sentiment. Starting at ₹2,686.95 compared to the previous closing figure of ₹2,687.50, the stock has retreated 1.86% to reach an intraday low of ₹2,637.55 within the ongoing Friday trading session. Analysts speculate that this dip might be due to profit-taking, considering the substantial gains the stock has witnessed recently.
L&T’s stock price has notably outperformed the equity benchmark Sensex over the past year, displaying an impressive growth of over 41%. In contrast, the Sensex has achieved a relatively modest increase of 11% during the same period.
Industry experts and brokerage firms are optimistic about the stock’s long-term potential. Particularly, global brokerage firm CLSA anticipates that India’s recent accomplishment of successfully landing Chandrayaan 3 on the moon will enhance the ‘Make in India’ initiative, potentially opening avenues for Indian entities like L&T to explore global markets for rockets and satellites.
Insights from Fundamental and Technical Experts consulted by Mint:
Fundamental Analysis
Abhishek Jain, Head of Research at Arihant Capital, notes that L&T shares have surged by 20% in the past three months, in stark contrast to the Sensex’s 5% growth. This notable surge is attributed to a robust order book driven by government infrastructure projects. Jain points out that the company’s strengthened infrastructure business has contributed to revenue growth, despite a recent quarter indicating revenue weakness. Jain highlights that L&T’s buyback at ₹3,000 has further bolstered the stock. While favorable business conditions support the stock’s rise, sustained growth relies on consistent orders and efficient execution. Investors with a one-year horizon are advised to closely monitor order inflow and execution performance.
Deepak Jasani, Head of Retail Research at HDFC Securities, underscores L&T’s position as a major beneficiary of increased capital expenditure from both private and governmental sources through infrastructure projects. The company’s robust quarterly results, a 14% YoY increase in the order book exceeding ₹4 lakh crores, and a substantial 100% YoY rise in the infrastructure projects segment’s order inflow to ₹40,000 crore, all contribute to a positive outlook. The company’s international orders have also gained traction, comprising 29% of the total order book, particularly from the Middle East. With a strong pipeline of ₹10 lakh crore orders for the remaining three-quarters of FY24, Jasani anticipates margin expansion post-FY24 and maintains a positive outlook on the stock, with a target price of ₹3,002.
Technical Analysis
Gaurav Bissa, VP at InCred Equities, identifies L&T as a consistently large-cap solid stock, noting its steady outperformance in recent months. The stock’s momentum surged after breaking a 12-year rising trendline on monthly charts. However, Bissa notes early signs of fatigue and suggests investors with a one-year horizon consider partial profit booking while aiming for a target of ₹3,200 with a stop loss at ₹2,400.
Vaishali Parekh, Vice President of Technical Research at Prabhudas Lilladher Pvt. Ltd, emphasizes that the stock has maintained support around ₹2,170 on the daily chart and crossed the significant 50EMA level at ₹2,332. Breaking the channel resistance barrier at ₹2,500 led to a substantial rise, supported by favorable indicators. With near-term support around ₹2,600, a breach below this level would weaken the trend. Parekh recommends staying invested with initial short-term targets of ₹2,950-₹3,000 and a longer-term outlook targeting ₹3,700 and ₹5,100. A strong support zone lies near ₹2,350-₹2,380 as per the lower trendline base of the channel pattern.
In conclusion, despite the recent drop in L&T’s share price and its impressive 41% surge in the past year, industry experts and analysts remain positive about the stock’s long-term prospects, considering its robust performance, strong order book, and potential growth opportunities in the infrastructure sector.
