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L&T stock price gains after it emerges lowest bidder for bullet train project

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L&T stock price gains after it emerges lowest bidder for bullet train project

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Shares of Larsen & Toubro rallied over 3 percent on Tuesday after the company emerged as the lowest bidder for the design and construction of 237 km length of viaduct for 508-km Mumbai-Ahmedabad High Speed Rail corridor.

Shares of Larsen & Toubro rallied over 3 percent on Tuesday after the company emerged as the lowest bidder for the design and construction of 237 km length of the viaduct for 508-km Mumbai-Ahmedabad High-Speed Rail corridor.
The stock price jumped as much as 3.6 percent to an intraday high of Rs 935.60 apiece on the BSE. At 11: 35 am, the shares were trading 2.29 percent higher at Rs 923.65.
"Financial bids for the design and construction of 237 km length of the viaduct for 508 km of Mumbai-Ahmedabad High-Speed Rail corridor were opened today and Larsen & Toubro Ltd is the lowest bidder," said the release by the National High-Speed Rail Corporation Limited.
Ahmedabad-Mumbai bullet train is the first high-speed train project of India, which is being built with the help of Japan.
Analysts believe the development could mean a positive surprise on FY21 order flow expectations if the Letter of Award (LOA) comes to fruition.
“Larsen & Toubro validated our stance of it being a key beneficiary of large, complex projects likely to be launched by the government to kickstart the next capex cycle starting in 2HFY21,” CLSA said.
The brokerage also believes that L&T could also benefit from a $5.3 billion tender balance ahead.
“L&T’s plan to monetise its mutual fund business could reduce the risk of a large cash injection in its financial services business and open the door for a large dividend from electrical divestment, as we have argued,” CLSA added.
The brokerage maintains a Buy rating and a SOTP-based Rs 1,280 target price. “The stock is at an inexpensive -1.5 standard deviation and we see it as being on the cusp of the next capex cycle upturn,” it said.
Jefferies also maintained a 'buy' rating on L&T with the target of Rs 1,280 per share. It believes that the bullet-train order will be a positive surprise on FY21 order flow expectations.
Further, Blackstone is reportedly in advanced talks to buy out the mutual fund business of L&T Asset Management Company.
The sale will help ease concerns about L&T funding its subsidiary, Jefferies said adding that the company supporting L&T Finance is a key investor concern.
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