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    Is L&T readying itself for post-lockdown phase? April orders surpass what it got in Q4FY20

    Is L&T readying itself for post-lockdown phase? April orders surpass what it got in Q4FY20

    Is L&T readying itself for post-lockdown phase? April orders surpass what it got in Q4FY20
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    By Mousumi Paul   IST (Published)

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    Since April 1, L&T has secured 23 large orders worth approximately Rs 35,000 crore.

    Every sector has been impacted due to the coronavirus pandemic across the world. However, one company has seen a steady rise orders in April so far, when compared to the fourth quarter of FY20.
    India's biggest engineering and construction company, Larsen & Toubro (L&T) has witnessed a surge in orders from India and abroad.
    Since April 1, L&T has secured 23 large orders worth approximately Rs 35,000 crore. In fact, the company recently raised Rs 6,400 crore in bond sales, seeking to double its cash position to Rs 25,000 crore.
    According to ET, the money raising event is only to ensure that the business runs smoothly in a difficult environment. Moreover, ratings agency CRISIL has upgraded L&T to triple-A, the top notch for its NCD issues due to its dominant position and risk profile.
    Despite receiving orders and raising money for the future, there's no positive sign in stock movement.
    If compared to last year, there has been a significant correction in L&T. The stock was trading at Rs 1,600 levels in mid-FY20, and as of April 23, the stock closed at Rs 843,35, almost half of last year's value. Even after receiving large orders this month, L&T's shares rose only 8 percent while on a year-to-date basis, it slipped 33 percent.
    If we take a glance at the company's current valuations, it seems L&T is sitting at an affordable level, with stock P/E (price-to-earnings) at 12.17x and return-on-equity (RoE) of 14.56 percent.
    L&T's order book, current price and valuation looks quite attractive but given the current delay in project execution and uncertainty amid the global lockdown, it remains to be seen whether the engineering giant would be able to reduce its order backlog this year,
    IIFLSecurities said that project delays in the capital goods sector will bring in revenue slippages of 10-25 percent in Q4FY20. L&T's core inflow is likely to drop 18 percent to Rs 400 billion, with 6 percent growth in the order book, said the brokerage.
    Project cash flows will be important to drive revenues, but expect higher risk for private capex, the report added.
    On the contrary, Motilal Oswal believes L&T is the best play in the capex story in India. The brokerage is of the view that the company will bounce back in FY22E, helped by a lower base and stabilization of working capital.
    Mirroring a similar view, Phillip Capital also feels that L&T should be able to hit the ground running much faster than its peers given its diversified orderbook.
    The company should be able to resume its work from April 20 onwards given that the Centre and State orders account 75 percent of the company's total orderbook, said the brokerage.
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