Dolat Capital is bullish on Larsen and Toubro has recommended buy rating on the stock with a target price of Rs 1200 in its research report dated June 06, 2020.
Dolat Capital's research report on Larsen and Toubro
Q4 execution was impacted by the pandemic but decent order flows of Rs 577bn(5% yoy) helped it end FY20 inflows with a 9% yoy growth vs the guided range of 10-12% and 12-15% respectively. WC, at 23.7% sales, while elevated yoy, is similar to 9M’20 levels and unlikely to deteriorate further. LT has prudently withheld guiding on FY21 on inflows or execution, given the current operating uncertainty. We expect execution disruptions to continue in H1, mainly due to labor challenges, before it picks momentum in H2. We trim our FY21E and FY22E estimates as outlined in Exhibit 2. LT is keeping an eagle eye on cash and working capital in a tough execution phase. LT remains the best play for the recovery in the capex cycle.
Outlook
We believe its size, diversity and balance sheet will be key competitive advantages. Current valuations are very supportive in our view. We maintain Buy with a SOTP based TP of Rs 1200.
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