Indian share markets have risen relatively well as compared to the regional Asian peers with NSE Nifty and BSE Sensex rising 12-15% while several underlying large-cap shares have grown more than 30% including Maruti Suzuki, TCS, HUL and HDFC Bank. In the corresponding time, the benchmark Nifty Infrastructure index has advanced only 2.5% whereas a couple of components have returned more than 10%.
We take a look at India’s largest infrastructure share that has returned about 18% in the last one year. Interestingly, the parent company is the largest infrastructure firm in the country by turnover, market capitalisation, net profit and investment.
Shares of the Mumbai-headquartered L&T (Larsen & Toubro) have returned nearly 18% in the last 12-month period. The stock of 80-years-old L&T has jumped 17.12% to Rs 1,366.4 in the last one year. In the same span, L&T has declared a dividend of Rs 14 per equity share and bonus issue in a ratio of 1:2. L&T features in India’s top 15 companies by market capitalisation and commands a market capitalisation of Rs 1,90,235.46 crore on BSE.
The research and brokerage firm HDFC Securities has given a ‘buy’ with a target price of Rs 1,614 per equity share. The recommended price implies an upside of 18% from the current market price of Rs 1,366.4 on NSE. “The company has guided for 10-12% growth in order inflows, 12-15% growth in revenue and a 25bps margin improvement in FY19. L&T has signed an undertaking with Schneider Electric for the sale of its Electrical & Automation (E&A) business for a consideration of Rs 14,000 crore, subject to regulatory clearance which would aid in the freeing up of capital for investing in the high-growth services business,” HDFC Securities said in a research report.
L&T has focussed on improving its working capital management and return ratios, early signs of which are visible. L&T offers size, visibility, consistency, return to core, and attractive financial parameters, HDFC Securities report said. “We feel investors could buy the stock at the CMP and add-on declines to the Rs 1235-1240 band (18x FY20E EPS and 15.2x FY20E EV/EBITDA) for sequential targets of Rs 1,511 (22x FY20E EPS and 17.4x FY20E EV/EBITDA) and Rs 1,614 (23.5x FY20E EPS and 18.2x FY20E EV/EBITDA) in 3 to 4 quarters. At CMP of Rs 1,372, it is trading at 20x FY20E EPS and 16.3x FY20E EV/EBITDA,” HDFC Securities report added.
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