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.
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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