Many foreign brokerages have revised their price targets higher on infrastructure congolmerate Larsen & Toubro after reports indicated that it has won the order for Saudi Aramco’s Jafurah unconventional gas development project.
CNBC-TV18 was the first to report about the order, which is likely to be valued at nearly Rs 24,000 crore. However, L&T is yet to make an official exchange announcement regarding the same.
Reacting to this potential order win, shares of L&T rose 4 percent on Thursday to close at a record high.
38 out of the 41 analysts that track L&T now have a buy recommendation on the stock. Six of those expect the stock to reach its or trade above its buyback price of Rs 3,000. L&T had announced a share buyback worth Rs 10,000 crore up to a price of Rs 3,000 apiece.
Here’s a look at what some brokerages had to say:
Brokerage firm CLSA has maintained its buy rating on L&T and raised its price target higher to Rs 3,240. This is the highest target on the street for L&T. The brokerage said that the large fossil and non-fossil middle east order is a catalyst for the target price revision.
CLSA further wrote that L&T is one of the few preferred contractors of Saudi Aramco with its long presence in the Middle East and competency. “By the time the orders are placed & EPS gets visible, expect the stock to re-rate,” the note said.
Another brokerage that expects the L&T stock to go beyond Rs 3,000 is Citi. It has maintained its buy recommendation on the stock with a price target of Rs 3,175. While the Middle East order is not official yet, Citi noted that L&T had increased its prospects size post the June quarter results for financial year 2024 due to expansion in hydrocarbon prospects.
A buyback of Rs 10,000 crore at Rs 3,000 per share further adds to shareholder confidence, according to Citi. The note also highlighted L&T’s balance sheet improvement, better working capital and consistent improvement in consolidated Return on Equity (RoE).
Morgan Stanley believes that the order in question accounts for 13 percent of the company’s annual guidance and 17 percent of core order inflows. The brokerage said that Saudi Arabia is undergoing an unprecedented transformation with nearly $1 trillion in gigaproject commitments and rapid demographic shifts. Morgan Stanley remains overweight on L&T with a price target of Rs 2,935.
Shares of L&T have now risen nearly 40 percent so far in 2023.
(Edited by : Hormaz Fatakia)
