Shares of the country’s largest infrastructure player, L&T or Larsen & Toubro ended 1,7% lower at Rs 3,687 on the NSE after a brokerage note from Kotak Institutional Equities. The brokerage has reiterated its sell recommendation on L&T, setting a target price of Rs 3100, citing apprehensions over the conglomerate’s exposure to Saudi Arabia’s shifting spending landscape.
The recent surge in L&T’s valuation, propelled primarily by anticipated growth in its Saudi business, has come under scrutiny in light of recent developments indicating a downturn in Saudi spending initiatives. Saudi Aramco’s announcement of a substantial US$50 billion reduction in medium-term capital expenditure, coupled with indications of an earlier-than-expected peak in overall capex, has raised red flags among market analysts.
The decision to scale back the ambitious US$500 billion Neom project has added to the prevailing sense of uncertainty surrounding Saudi Arabia’s investment outlook. Kotak Institutional Equity underscores the potential ramifications of these developments on L&T’s order book, suggesting that the company may struggle to achieve significant growth beyond its FY2024 base. With a downward revision of ordering estimates for FY2025 by 6%, Kotak projects a corresponding 1-4% reduction in core Engineering & Construction (E&C) segment EBITDA
