Three bidders, involving seven major infrastructural companies, had participated in competitive bidding. The bidders, other than L&T, were the Afcons Infrastructure-IRCON International-JMC Projects India consortium, and the Tata Projects-NCC-J Kumar Infra Projects-HSR consortium, according to the Business Standard report. CLICK HERE TO READ FULL REPORT
Awarding of such mega projects will significantly strengthen L&T's order book and further enhance its revenue visibility for coming years in times of a challenging economic environment. Also, L&T is well placed in terms of its capabilities to execute such complex and mega projects. Working capital and cash flow situation continues to remain key monitorables, ICICI Securities said in a note.
India's capex cycle peaked in FY08-09 and has been choppy since. L&T has seen its profits rise at 11 per cent CAGR in this period, as it gained share in the E&C business and improved cost efficiencies. De-rating in the last 18 months is driven by the Mindtree acquisition - divestment of funds into non-core business, apart from the COVID-19 impact.
Analysts at Jefferies believe that as investors regain confidence in L&T's capital allocation strategy, share of low ROCE DPL and Finance continue to reduce and E&C normalises, the stock should re-rate at least to 2019 levels.
Regarding the media reports, Jefferies said the train project could eventually mean a positive surprise on FY21E order flow expectations if the Letter of Award (LOA) comes to fruition. The brokerage has 'BUY' rating on the stock with target price of Rs 1,280.
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