Buy Larsen and Toubro; target of Rs 4400: Motilal Oswal

Moneycontrol • 4 days ago

Original source

Key Investment Pillars

  • Strong order inflows: LT's core E&C order inflows grew 32% YoY, driven by a healthy traction across markets, with a strong prospect pipeline of INR10.3t.
  • Improved execution: Despite supply chain challenges, LT's execution growth has picked up sharply, with international revenues up 21% YoY, driven by a more favorable execution profile of projects.
  • Robust financials: LT's consolidated revenue and PAT grew 16% and 33% YoY, respectively, driven by better-than-expected execution, higher other income, and a lower tax rate.
  • Disciplined working capital management: LT's net working capital-to-sales ratio improved to 1.7%, driven by higher customer advances and improved collections.

Thesis Validation Checklist

To validate the investment thesis, investors should monitor the following signals over the next 12 months:

  • Order inflow growth: LT's ability to maintain its order inflow growth momentum, particularly in the international solar business.
  • Execution growth: The company's ability to sustain its execution growth, despite supply chain challenges.
  • Margin expansion: LT's ability to expand its margins, driven by improved execution, cost discipline, and higher other income.
  • Working capital management: The company's ability to maintain its disciplined working capital management, driven by higher customer advances and improved collections.